Are we going to live a new crash like in 1929?

Are we going to live a new crash like in 1929?

This week of September 2007 will certainly enter in the history. In fact for the first time in 30 years, an english bank is obliged to request help from the bank of England because of drastic loss. And this bank is one of the most prestigious in the UK : Northern Rock. This company detains about 20% of the english mortgages...it means Northern Rock is the english number one in term of market shares in this business. You can now understand the astonishment and the fear of the whole business, economical and financial community! Although Northern Rock was the flagship of the UK, it suddenly appears to be wobbly... Is it only the problem of a company? or are we going to live a new crash similar to the Wall Street one of 1929?
The crash of 1929 is the biggest stock market crash in the history. After “the roaring
twenties”' impressive profits, shares prices suddenly collapsed...the economic bubble burst! Only one week before, the economy was described as very strong by most of the economists. In this period of euphoria, people even borrowed money to invest in stock market. There was a big
confidence in the market. And suddenly all this confidence disappeared...and transformed into a big panic. It appears that all the previous confidence was only speculation. Thus shareholders became aware of the reality...their dream transformed in nightmare. Most of them have been obliged to sell their shares in order to pay back their loans...however they sold these shares at very low prices. Consequently shareholders lost a lot of money. And in the same movement, many banks went in bankrupt. In fact they lent a lot of money to their customers, who have been unable to pay back this money. It was a domino effect, a system crisis. At first shares collapsed... then customers lost their money... then banks went bankrupt...and finally the world witnessed the biggest depression of the history : the Great Depression!
What is the extent of the current crisis? Are we going to witness a new crash? This question may seem a little bit pessimistic. But let's study the current situation. The crisis started in the USA. In fact because of low interest rates and above all because of the bankers carelessness, very poor and insolvent people have been able to borrow money to purchase new houses. Unfortunately most of these customers have been unable to pay back their loans. Consequently many banks are now in big trouble. This phenomenon appears at first in the USA, but now it seems to invade Europe as well.
That's why the situation of Northern Rock is not only the problem of a sole company, but it may be the beginning of a new crash... or even another depression! Panic has now invaded people.
In the end, it will be interesting to see how politics will manage to handle this situation.
There is a big conflict about the interest rate : shall centre bank increase it in order to control the loans emission, or shall centre bank on the contrary decrease the interest rate in order to avoid a depression and enhance the economy. It may be necessary to create new laws like the famous “Glass-Steagall Act” which followed the crash of 1929.