Bank PO (IBPS) Essay Winner June 2009: By Rajashekera. N
Title: The Great Depression: Will it happen again?
Depression means economic slowdown where economic activities becomes a little slow, lack of liquidity with the financial institutions, production comes down because of lack of demand the purchasing power of the people comes down. A great depression occured in 1920's when countries suffered with great financial losses and the production halted. The current depression is caused in the banking sector since many defaulters did not pay their loans especially the housing loans.
Too much competition makes in the manufacturing sector makes goods cheaper. This makes people to buy more using their debit and credit cards and eventually they are unable to pay back to the credit cards. People used to mortgage their property in lieu of the loans since the loan money is more than the actual cost of the property. This is because of sudden downfall of the property rates. Sub prime lending banks got bankrupted. Their shares come down and this resulted in the collapse of the stock market and hence money supply to the economy got worsened. Basically this problem is a consequence of the human attitude about buying everything which is cheaper and those goods will be replaced by other goods or model in just a few days or weeks.
The great depression happened in 1920's and now will it be again? A question that hovers in the minds of one and many. There is no guarantee that it will not happen again. As long as the materialistic life attitude keeps on growing and markets flooded with goods there is a danger of depression always. Money is in transaction so fast that it changes many hands in a single day. With internet, money is transacted in a split second. Everyone, company and country wants to be economically rich and have huge financial resources. Wealth without hard work may not remain longer and some time or the other due to ambitious projects and plans there is always a possibility of becoming bankrupt whether it is individual or company or a nation.
Adding to this is the corruption in the economy, hegemonistic attitude of the developed countries, mushrooming MNC's, banks giving cheaper loans, super markets, human attitude of having every modern facility irrespective of whether the wallet allows it or not will lead to depression in future if we do not learn from the current scenario and stop repeating the same mistakes. Collapse of the stock markets, housing banks becoming bankrupt, people loosing jobs, lack of liquidity in the economy, manufacturing sector, services sector becoming slow are the features of our current economic depression. Things will be corrected by global summits, G 8 and other countries which are trying hard to bring the economy back on track and reducing the protectionist policies. Giving subsidies and bail out plans may solve the problem gradually. But new problems in the economic sector may lead to depression. So we can not assume or predict exactly the problems that arise and when they may arise and their impacts. Solutions to the problems may lead to creation of new problems. So there is no surety that depression may not happen again although the severity may be less or even more. No one knows, time itself will tell.