One huge difference between the Great Depression and today
Love it or hate it, it is undeniable that the Federal Reserve and the Treasury currently have one of the loosest monetary policies ever seen. This is one key difference between the Great Depression and today.
Back in the late 1920s there was a great deal of political turmoil in Europe, specifically Weimar Republic. Many Europeans, fearing that the German government would fail, were sending their gold to the United States. In 1929, $175 million worth of gold flowed into the U.S. The influx during 1930 was an even larger $280 million. Had the Federal Reserve at the time followed the existing gold standard rules, this gold would have increased the amount of money available to individuals and banks. However, many at the Fed feared that this would cause massive inflation, so they altered the existing gold standard rules and tightened their monetary policy to soak up this excess money.
Despite this massive influx of foreign capital, the money supply in the Unites States actually dropped by 4% between the end of 1928 and the end of 1930. As hard as it is to believe with the economy and the stock market were rapidly deteriorating, the Dow Jones Industrial Average fell from a high of 368 on August 20th 1929 to 230 on October 29th and eventually through the 200 barrier in October of 1930, the government was tightening its monetary policy instead of loosening it. This action likely caused things to get much worse than they needed to.
Contrast this 4% contraction in the money supply back then with the following charts of M1 & M2 in the United States today:
Now I realize that the velocity of money has certainly dropped significantly, meaning that every dollar that the government prints today does not have the same effect that it would have had a few years ago, but this unprecedented increase in the money supply may just be what keeps the current bad recession from becoming a depression. The economy will definitely get worse before they get better, but those who believe that we are headed for 20%+ unemployment are probably way off base.
Note, the statistics for this post were obtained from "The Forgotten Man: A New History of the Great Depression" by Amity Shlaes.