[The Fountain] Depression, panic or crisis
CHO HYUN-SOOKThe author is a business news reporter of the JoongAng Ilbo.
The worst crisis in the economic history of the United States was the Great Depression. The stock market crash on Black Thursday, or Oct. 24, 1929, was the beginning. The financial market collapsed and businesses fell. In only three or four years, industrial production was halved, and more than 10 million people lost their jobs. The Great Depression that continued for 10 years left the U.S. economy devastated.
Even now, the Great Depression is mentioned every time there is a sign of crisis in the United States. It is similar to how Koreans are traumatized by the IMF bailout in 1997. Whenever economic indicators worsen, analysts like to make a reference to the Great Depression.
The 31st U.S. president, Herbert Hoover, was the one who made the phrase “Great Depression” widely used among the public. He was the president at the onset of the Great Depression. He avoided using words like “crisis” or “panic” which had been often used for economic difficulties. Instead, he mainly used “depression” in his speech.
At the time, it was a word which felt less threatening and frightening. It was a strategy to calm excessive market anxiety, but it turned out to be a failure. He misjudged the intensity of the crisis America faced. The name of the crisis was created coincidentally yet fatefully.
Similar things happened 15 years ago. The beginning was the subprime mortgage crisis in the U.S. in 2007. In the aftermath, three of the top five American banks — Bear Stearns, Merrill Lynch and Lehman Brothers — collapsed, and it evolved to a financial crisis. The crisis that began in the U.S. spread all over the world. It is how the term — the Global Financial Crisis of 2008-2009 — was created.
After the Great Depression and the financial crisis, another shadow of crisis fell over the global economy. The beginning was the closure of the Silicon Valley Bank (SVB), a mid-sized bank in the United States.
Credit Suisse (CS), a major European investment bank, was on the verge of collapse but was saved by a UBS takeover. But the signs are still not looking good. Less than two weeks have passed since the SVB crisis, but the term “banking crisis” has already popped up on the news.
Financial authorities and large financial firms in each country are struggling to prevent the situation from spreading into a mega-crisis. But looking back on the history of crises, greed was always defeated. I am even more concerned of the ending which is yet to come.
with the Korea JoongAng Daily
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