Did the US cause the Great Depression worldwide. (1930s, economy, state)
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Ive been having a read on some sites about the Great Depression and one says that it started in Wall st at the crash.. I didnt know this and wonder if its true...
In 1929, the Wall Street Crash plunged the USA into economic depression. The Americans were alarmed, so they called in their loans to other countries and put up customs barriers to stop imports of foreign goods. This created a depression across the rest of the world.... what a as state of affairs if this is true... This might be taken from the wrong source though...and might not be as simple as theyve stated...
Ive been having a read on some sites about the Great Depression and one says that it started in Wall st at the crash.. I didnt know this and wonder if its true...
It is not true.
Quote:
Originally Posted by dizzybint
In 1929, the Wall Street Crash plunged the USA into economic depression. The Americans were alarmed, so they called in their loans to other countries and put up customs barriers to stop imports of foreign goods. This created a depression across the rest of the world.... what a as state of affairs if this is true... This might be taken from the wrong source though...and might not be as simple as theyve stated...
The underlying cause of the Great Depression globally was a shift to Electro-Mechanical Industrialization, resulting in Surplus Labor, and then for the US specifically, an additional series of government blunders exacerbated the situation, including the establishment of protective tariffs and a massive tax increase, plus failed banks.
Stock Market crashes in and of themselves cannot cause Recessions or Depressions.
For the US, the Great Depression starts with the 1925 Recession, continues with Recessions in 1928, 1930, 1935, 1937, 1946 and 1949. I also include the three Recessions during the Eisenhower Administration with the third and final Recession ending in 1961 during the Kennedy Administration. During that period, the US moved into the 2nd Level Economy, then transitioned to the 3rd Level Economy, while most of Europe was still digging out of WW II.
The underlying cause of the Great Depression globally was a shift to Electro-Mechanical Industrialization, resulting in Surplus Labor, and then for the US specifically, an additional series of government blunders exacerbated the situation, including the establishment of protective tariffs and a massive tax increase, plus failed banks.
Stock Market crashes in and of themselves cannot cause Recessions or Depressions.
For the US, the Great Depression starts with the 1925 Recession, continues with Recessions in 1928, 1930, 1935, 1937, 1946 and 1949. I also include the three Recessions during the Eisenhower Administration with the third and final Recession ending in 1961 during the Kennedy Administration. During that period, the US moved into the 2nd Level Economy, then transitioned to the 3rd Level Economy, while most of Europe was still digging out of WW II.
So we are basically in depressions all the time? Are we good after three economic transitions or will there be more?
Ive been having a read on some sites about the Great Depression and one says that it started in Wall st at the crash.. I didnt know this and wonder if its true...
In 1929, the Wall Street Crash plunged the USA into economic depression. The Americans were alarmed, so they called in their loans to other countries and put up customs barriers to stop imports of foreign goods. This created a depression across the rest of the world.... what a as state of affairs if this is true... This might be taken from the wrong source though...and might not be as simple as theyve stated...
The US stock crash of 1929 triggered the GD but was not the cause for it. For a depression to take root it takes following factors IMO:
1. Wealth and income inequality reaches a critical level (1929 and 2007 check)
2. Unsustainable leverage in the financial system (in 1929 it was margin loans to stocks, in 2007 it was RE loans) after a period of "financial deregulation".
3. Political Gridlock preventing decisive actions (certainly worse 1929-33 before FDR took over than in 2007 but look at Europe where inaction cause a secondary crash in 2011).
The issues in 1929 and 2007 were world-wide they just happened to be triggered in the US. Every country drank the financial deregulation cool-aid, engaged in massive wealth and income transfers to the top (trickle up economy) and political gridlock is just as bad everywhere.
If we just remembered the then FED Chairman Eccles words from the early 1930s we could have prevented what happened in 2007:
"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped."
One thing to consider...the monetarist economists put forth the hypothesis that in 1929 the Federal Reserve should have combated the collapse of GDP in 1929 by flooding the economy with cash in the form of low interest rates and monetary infusions to struggling banks - the monetarists' claim was that the complete disappearance of credit in the system, combined with money velocity dropping to near zero exacerbated a severe economic downturn into a depression. However, the dollar was still on the gold standard in 1929 - the Federal Reserve was limited by the Federal Reserve Act, which required gold backing for Federal Reserve notes.
Compare the actions of Fed in 1929 to their actions in 2008: not bound by a gold standard, the Fed was able to inject liquidity into the economy. If you buy into the monetarist action, then you would believe that this prevented a second Great Depression.
The causes of the Great Depression have never been conclusively established. The most likely culprits were:
1. A pattern of under consumption and over production by business and industry.
2. The virtual collapse of the banking system with a huge contraction in the monetary supply that took place in the years immediately following the stock market crash.
3. Highly inequitable distribution of wealth that reduced the ability of the masses to purchase and consume goods.
4. The Smoot Hawley Tariff which basically shut down imports. Other countries retaliated and American exports were dramatically reduced.
5. While overall interest rates declined, real interest rates actually increased because of a decrease in the money supply and a literal reduction in wages. Interest rates needed to be negative to reflect the huge trauma that had taken place in the economy.
The reason the Depression lasted so long is not because of a failure of government policy. Its because it was such a huge economic contraction with multiple causes.
Thanks for your contributions.... it just seemed such a massive blow to most of the World at that time..so sad with desperation and poverty, people queiing for hours hoping for a job, even begging for work.... I saw one photo of a man with a placard...saying Speaks three languages. have three trades, went to fight three years. have three children, but only wants one job.... says it all.
Thanks for your contributions.... it just seemed such a massive blow to most of the World at that time..so sad with desperation and poverty, people queiing for hours hoping for a job, even begging for work.... I saw one photo of a man with a placard...saying Speaks three languages. have three trades, went to fight three years. have three children, but only wants one job.... says it all.
there seems to be a lot of debate over what caused the Depression but its said that the US had lent out a lot of money to other countries when things were good then demanded it all back after the Crash..and that far too many goods were being manufactured and not enough people who could buy them...
We also had banks engaging in risky business with their customers' money. Laws were put in place after the fact to keep them from doing this. These laws were altered or repealed in the Reagan era. We've seen how that turned out.
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