The 1907 Financial Panic and the 2008 Financial Crisis

Introduction The United States economy along with most developed countries experience cycles of booming years, which are also subject to periods of economic contractions. The cycles in an economy are dependent on many factors and recognizing historical trends can provide forecasts to where an economy is heading and reduce recurring mistakes. Mark Twain once said, â€Å"History does not repeat itself, but it occasionally rhymes.† (Carr) The Great Recession of 2008 precisely emphasizes Twain’s historical understanding with respect to the Panic of 1907. Almost exactly 100 years after the financial crisis of 1907, the poem known as The United States economy, holds a stanza rhyming it with the 2008 financial crisis. The tail of these two events is compared to better understand the elements in an effort to rhyme the next line of the poem with a new set of syllables. Before understanding these elements, a financial crisis is defined as â€Å"A situation in which the value of financial ins titutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. (Investopedia) 1907 Financial Panic During the early 20th century, the expansion of industry and finance throughout the United States had grown so large that it required some form of centralized monetary control. The dailyShow MoreRelatedBailouts Effect on Economy770 Words   |  3 PagesAlmost 1.2 trillion dollars were spent on bailing out the various banks in the 2008 financial crisis. First, what bailouts are is explained. Then, the history of bailouts in the US is told. Finally, the effects of the recent bailouts are analyzed. 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