With the novel coronavirus pandemic severely affecting the global economy, some experts have begun comparing the current crisis with the Great Depression — the devastating economic decline of the 1930s that went on to shape countless world events.
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The Great Depression was a major economic crisis that began in the United States in 1929, and went to have a worldwide impact until 1939.
It began on October 24, 1929, a day that is referred to as “Black Thursday”, when a monumental crash occurred at the New York Stock Exchange as stock prices fell by 25 %.
While the Wall Street crash was triggered by minor events, the extent of the decline was due to more deep-rooted factors such as a fall in aggregate demand, misplaced monetary policies, and an unintended rise in inventory levels.
The havoc caused in the US spread to other countries mainly due to the gold standard, which linked most of the world’s currencies by fixed exchange rates. In almost every country of the world, there were massive job losses, deflation, and a drastic contraction in output.
In Europe, economic stagnation that the Depression caused is believed to be the principal reason behind the rise of fascism, and consequently the Second World War.
It had a profound impact on institutions and policymaking globally, and led to the gold standard being abandoned.
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