The Second Great Depression (D2)

The Second Great Depression (D2) was a worldwide economic downturn starting in most places in 2007. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark on how far the world's economy can fall. The Second Great Depression originated in the United States; historians most often use the [http://en.wikipedia.org/wiki/Subprime_Crisis Subprime Mortgage Crisis] and the resulting [http://en.wikipedia.org/wiki/Credit_crisis_of_2008 Credit Crisis] as the catalyst to a series of events that severly damages the worlds economies .

The depression had devastating effects both in the developed and developing, largely dependant on the United States as the worlds economic engine. International trade was deeply affected, as were personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on finance, manufacturing and trade. Credit from most convential sources was virtually halted in many countries as the banks restrained lending on fear of additional losses. Commodity prices collapsed as the worlds economies ground to a halt. Facing plummeting demand with few alternate sources of jobs, areas dependent on services and manufacturing suffered the most. [4] Even shortly after the [http://en.wikipedia.org/wiki/Wall_Street Wall Street] Crash of Oct 2008, optimism persisted.

Some of the factors contributing to the onset of the Second Great Depression (D2) included 1) [http://en.wikipedia.org/wiki/Subprime_Crisis Subprime Crisis] that involved banks lending to uncreditworthy borrowers. This practice was promoted by numerous parties based on their own self interests including activist groups such as [http://en.wikipedia.org/wiki/ACORN ACORN] , Congressional Representatives such as [http://en.wikipedia.org/wiki/Barney_Frank Barney Frank] and the mortgage industry companies such as [http://en.wikipedia.org/wiki/Countrywide_Bank Countrywide] .

2) Deregulation of the Banking industry in 1999 under the [http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act Gramm-Leach-Bliley] act, that effectively eliminated the [http://en.wikipedia.org/wiki/The_Great_Depression First Great Depression] Era [http://en.wikipedia.org/wiki/Glass_Steagal_Act Glass-Steagal] Act. This dergulation was created in a compromise between President [http://en.wikipedia.org/wiki/Bill_Clinton Bill Clinton] and Congressional Republicans that had been pushing for the deregulation. Bill Clinton, embroiled in a sex scandal was unable to fend off the challenge of the Republicans led by [http://en.wikipedia.org/wiki/Phil_Gramm Phil Gram] .

3) The massive buildup of leverage in the [http://en.wikipedia.org/wiki/Derivative_(finance) Derivative] market between the worlds major financial players.

4) The collapse of the [http://en.wikipedia.org/wiki/Shadow_banking_system Shadow Banking System] .

5) The collapse of many major [http://en.wikipedia.org/wiki/Hedge_funds Hedge Funds] during the last quarter of 2008.

6) The massive inflation caused by US Federal Reserve Bank Chief [http://en.wikipedia.org/wiki/Ben_Bernanke Ben Bernanke] in his efforts to re-establish liquidity to the financial system. Failing to realize that it was a crisis of confidence of banks and lenders due to earlier losess, his "flood them with dollars and they will lend" policy did little to eleviate the systematic breakdown in the [http://en.wikipedia.org/wiki/Credit_market credit markets] .

7) The efforts to save Wall Street by US Treasury Secretary [http://en.wikipedia.org/wiki/Hank_Paulson Hank Paulson] that led to a loss of confidence in investor confidence.