Double the Depression

Carain Yeung

The United States of America is always the leading nation in the world economy after her victory in World War One. However, the US economy has been covered in a mist since Lehman Brothers Holdings Inc. filed for bankruptcy in September, 2008. This is the biggest financial crisis since the Great Depression in 1929.

In 1929, the New York stock market crashed because of over-speculation. That caused unemployment and poverty. Other than that, many social problems, such as homelessness and the break down of families, drove the country to a bad state. It was during that time that the US demanded the European countries to repay their war debts. The act seriously affected the European economy. Since the crush down of the stock market, the demand for goods has declined rapidly. The US stopped buying products from Europe and Japan, resulting in the closures of many factories. The whole world was affected.

Nearly 80 years later, the disaster seems to be back. In September 2008, Lehman Brothers, the 4th biggest financial institution collapsed. The next day, the Wall Street opened down more than 300 points. Like the Great Depression, this shakes the whole world and makes many countries suffer from the financial tsunami. Not only the US stock market, but the stock markets of countries around the world such as Germany, the United Kingdom, China, Indonesia and Singapore also showed a rapid decline. Investors in Hong Kong are not exclusive of the trend. Some investors here bought Lehman Brother’s minibond and lost a large percentage of their savings.

In order to boost investors’ confidence, the US president George W. Bush brought out a US$700 billion financial plan. At first the Congress banned this bailout plan. After several meetings, the plan was proposed publicly. However, the stocks worldwide dropped instead of soared. The deferral plan failed to stimulate the economy but still soothed the tension in the market. Other than the US, many governments are striving hard to boost the economy during the hard times. The Australia government brought up a guarentee on bank savings. Their hard work stimulated the market and soothed the crowd for a while.

According to an interview by CNN, Bill Gates remains optimistic toward the crisis. Apart from remarking that it is an ‘interesting crisis’, he comments that the unstable economy is unlikely to lead to another depression. Mr Gate believes that the economic crisis would not challenge capitalism in the US. He also states that he is not worried about the economy. Despite all he says, however, investors affected by the bankruptcy of the Lehman Brothers are still furious and worried about their savings.

How far will the crisis go? How accurate are Bill Gate’s predictions? We may just find the answer in the following year as events unfold themselves.

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