The most recent financial crisis was an all encompassing meltdown that affected the entire global economy. It is nearly impossible to quantify the distress this crisis put on the American economy and the world has yet to see the long term damage. After any disaster, people are eager to point fingers. This financial meltdown was no different, as critics were quick to blame anything and anyone from Wall Street to fair value accounting. It’s hard to pinpoint exactly what caused the most recent financial crisis, and even time may not tell. Economists are still trying to figure out why the stock market crashed in 1929, and Ben Bernanke recently stated “to understand the Great Depression is the Holy Grail of macroeconomics.” (Bernanke) Most of the discussion aimed at identifying causes of the crisis is focused on the financial structure of our economy. This has led to incongruent conclusions by many financial experts. It may be more important to direct attention to the social mechanisms that could have influenced not only this most recent crisis, but also the stock market crash of 1929 that threw the United States into the Great Depression.
While these two crises have their differences, at the very core we can find striking similarities. Both the state of the economy and pre-crisis attitudes and behaviors are similar in the two meltdowns that are separated by nearly a century. After seeing the devastation that these attitudes and behaviors caused in the 1920s, it can only be described as a social phenomenon that we allowed the recent financial crisis to occur. One of the most notable factors seen in behavioral and social mechanisms that led to the crises is greed. Instead of choosing to learn from past mistakes, the economy and its willful participants, blinded by greed, happily succeeded in repeating the past. In addition, some mistakes may never be learned from if the government continues to bail out large public corporations. The repeat in financial
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