Sunus Teknikleri

279
-1

Published on

Great Depression
Seher Hakan

Published in: Business, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
279
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
5
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Sunus Teknikleri

  1. 1. GREAT DEPRESSION AND SUBPRIME MORTGAGE CRISIS SEHER HAKAN
  2. 2. CONTENT <ul><li>How Great Depression started? </li></ul><ul><li>Causes of Great Depression </li></ul><ul><li>Causes of Subprime Mortgage Crisis </li></ul><ul><li>How Crisis Spread All Over The World </li></ul><ul><li>Basic Differences </li></ul><ul><li>Conclusion </li></ul>
  3. 3. How Great Depression Started? <ul><li>Black Thursday on 24 th of October 1929 </li></ul><ul><li>Started with Great Crash of Stock Market </li></ul>
  4. 4. Numbers of Crisis <ul><li>Real GDP fell 30% </li></ul><ul><li>Industrial production declined 47% </li></ul><ul><li>Wholesale price index fell 33% </li></ul><ul><li>Unemployment rate increased 25% </li></ul>
  5. 5. Table
  6. 6. Causes of GDP <ul><li>Stock Market Crash </li></ul><ul><li>Banking and Monetary Contraction </li></ul><ul><li>Gold Standard </li></ul><ul><li>International Lending and Trade </li></ul>
  7. 7. Stock Market Crash <ul><li>In 1929, US stock price tripled </li></ul><ul><li>Panic selling </li></ul><ul><li>October 1929, stock price decreased by 33% </li></ul>
  8. 8. Stock Market Crash <ul><li>Aggregate demand decreased. </li></ul><ul><li>Business investment decreased. </li></ul><ul><li>People feel poorer. </li></ul>
  9. 9. Banking and Monetary Contraction <ul><li>Banking panic </li></ul><ul><li>Money supply decreased </li></ul><ul><li>Lose confidence </li></ul>
  10. 10. Banking and Monetary Contraction <ul><li>20% of the banks went bankrupt </li></ul><ul><li>Interest rates increased </li></ul>
  11. 11. Gold Standard <ul><li>The UK abandon the gold standard. </li></ul><ul><li>The Great Depression widen to the world because of gold standard. </li></ul>
  12. 12. International Lending Trade <ul><li>Lending rate decreased </li></ul><ul><li>Trade decreased </li></ul>
  13. 13. Mortgage Types <ul><li>Prime </li></ul><ul><li>Subprime </li></ul>
  14. 14. Causes of Subprime Mortgage Crisis <ul><li>Boom and burst in US housing market </li></ul><ul><li>Speculation </li></ul><ul><li>Securitization </li></ul><ul><li>Financial innovation </li></ul>
  15. 15. Boom and Burst in US Housing Market <ul><li>Housing prices decreased. </li></ul><ul><li>Value of mortgage back asset decreased. </li></ul>
  16. 16. Speculation <ul><li>Interest only adjustable rate mortgage </li></ul><ul><li>Easily given up houses </li></ul><ul><li>NINA people </li></ul>
  17. 17. Securitization <ul><li>Distribute risk </li></ul><ul><li>Issue new securities </li></ul>
  18. 18. Financial Innovation <ul><li>Offsetting risk exposure </li></ul>
  19. 19. How Crisis Spread All Over the World? <ul><li>Credit Channel (Narrowed Economic Activity) </li></ul><ul><li>Portfolio Investment Channel (Global Liquidity) </li></ul>
  20. 20. How Crisis Spread All Over the World? <ul><li>Foreign Trade Channel (Tourism, Real Estate Sale) </li></ul><ul><li>Negative Impacts of Expectation (Panic, Demand) </li></ul>
  21. 21. Basic Differences <ul><li>Gold Standard </li></ul><ul><li>Credit-portfolio investment </li></ul><ul><li>Foreign trade </li></ul><ul><li>Globalisation </li></ul><ul><li>Negative expectation </li></ul>
  22. 22. Basic Differences <ul><li>In 1929 - Tax and tariffs increased. </li></ul><ul><li>In 2008 - Recapitalization </li></ul>
  23. 23. Conclusion-What we learnt? <ul><li>Interest rates fall during crisis. </li></ul><ul><li>There must be harmony between fiscal and monetary policy. </li></ul>
  24. 24. Any Questions?
  25. 25. <ul><li>THANKS FOR YOUR </li></ul><ul><li>ATTENTION… </li></ul>

×