Is the COVID-19 crisis leading us to the Great Depression of 1929?

Indeed, the global economy seems to be pushing towards an all-time low since the COVID outbreak. The pandemic has affected almost all nations around the globe, with cases rising day by day. As of June 24th 2020, the total cases around the world have reached a whopping 9.4 million, with nearly 482 thousand deaths. The US is leading the unfortunate charts at nearly 2.4 million cases, sharing more than 25 per cent of the count with 123 thousand deaths. Just to give an idea, as there are many stats available throughout the internet that can be referred to for further analysis, even a superpower like the US could not keep itself out of the repercussions. Obviously, from the data, we can deduce that COVID does not spare people based on their standard of living or how their national economy is performing on a global scale. 

As far as the market is concerned, we can see multiple examples of unprecedented downfalls in the share prices of the Oil Giants. Brent Oil falls from ~$69 per barrel in Aug 2019 to $19.33 per barrel on April 21st 2020. WTI Oil falls from ~ $63 per barrel in Sep 2019 to (-)$37 per barrel on April 20th 2020. But to the surprise, the market has started recuperating at an astounding rate. There are some reasons that are actually helping the market grow. Internet - All the stocks accessible on a single click, beginners are also investing via mutual funds, where SIPS sound a better deal to reduce the associated risk attached to equity trading, most of the service-based personnel working from home find it easier to invest quality time contemplating the stock charts. Not only stock trading but also the service sectors are coming up with lucrative deals to help people stay at home. Online education portals, self-driving cars, e-commerce, digital platforms, be it music or videos, broadband services, online grocery stores, food delivery apps, digital newspapers, almost everything that can be served digitally.

Yeah, the economy might face recession as technically many nations have experienced a negative economic growth in the last quarter and an ongoing decline that defines the condition for it. But surely we should not compare this to the Great Depression of 1929. A worldwide depression during the 1930s originating from the US after a major fall in the stock prices that began around Sept 4, 1929 and resulted in the stock market crash of October 24, 1929, also known as Black Thursday. The causes were manifold: Overproduction in the manufacturing and agricultural sector, unequal distribution of wealth where 3% of the population controlled ~ 50% of the nation’s wealth, stock market crash and a financial panic, high tariffs and war debts from the WWI, monetary policy where one could buy stock now and pay later.

Though President Herbert Hoover from the Republican party winning the election in 1928, who had promised “A chicken in every pot”, could not foresee the Black Tuesday of October 29, 1929, that the US stock market was about to see. More than 16.4 billion shares were traded on a single day on the NYSE, amounting to a loss of $5 billion that led to the great depression that spread like a pandemic across nations.

Americans started taking money out of banks, and hence, the banking system collapsed. Salaries were cut, prices came down, unemployment rose to more than 25%, farm income dropped by half, leading to a fall in the GNP.

The New Deal Policy by President Roosevelt was a kick-start to the economy. A series of federal programs, public work projects, financial reforms and regulations were enacted. The Civil Conservation Corps(CCC), Civil Works Administration(CWA), Farm Security Administration(FSA), Social Security Administration(SSA) and National Industrial Recovery Act of 1933(NIRA) were some of the measures produced for the depression.

Therefore, financially speaking, we are still in a better condition as compared to 1929, and the reason is we are all together, always connected, making decisions for the greater good and nevertheless, we all know that the economy might collapse and are trying their best to hold the leaning tower. Yes, it's not physical but can lead to great mental stress, considering the deaths recorded in this age of medical advancement and the home alone mode that might result in a severe nervous breakdown. We all need to stay put in this unfortunate hour and keep focusing on gaining the best out of it. It sucks but this moment is our power and quoting Peter Parker “With Great Power comes Great Responsibility”