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There are several thinks that led to the Great Depression.
Here are 5 of them.
Do they sound familiar with the events of today?
Are they relevant?
1. Stock Market Crash of 1929
Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough
2. Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less expenditures.
3. Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation.
4. American Economic Policy with Europe
As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation. In the long run this saved the United States of America, from ever lasting devastation.
5. Drought Conditions
While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath.
Also do not overlook the Roaring 20's preceeding the crash. Easy credit, lax regulations, RE booms.
Sound familiar also ?
History does repeat itself..it just takes on different colors.
Harding pulled us out of the Wilson depression fiasco, to create the roaring 20's, by letting it correct itself. It was Coolidge that tried government controlling the economy, much like Obama is trying to do. That had an effect on the crash.
But these "events" miss the point. It was the excessive debts, and the wasteful malinvestments
that were the actual CAUSE of the great depression. Most of the above 5 points were mere symptoms of an over-indebted economy.
To understand better, the actual causes, start here:
[URL]http://www.city-data.com/forum/politics-other-controversies/892687-y-shaped-down-turn-economy.html[/URL]
Harding pulled us out of the Wilson depression fiasco, to create the roaring 20's, by letting it correct itself. It was Coolidge that tried government controlling the economy, much like Obama is trying to do. That had an effect on the crash.
Coolidge? Coolidge is known for doing NOTHING to regulate the economy. He was extremely laissez faire, and appointed do-nothing pro-biz types to head the "regulatory" commission.
The 20's were roaring for a lot of the reasons that the 2000's were roaring, and neither was sustainable. It was a party that couldn't last.
In 1920-1921 there was an acute recession, followed by the prolonged recovery throughout the 1920s. The Federal Reserve expanded credit, by setting below market interest rates and low reserve requirements that favored big banks, and the money supply actually increased by about 60% during the time following the recession. The phrase "buying on margin" entered the American vocabulary at this time as more and more Americans over-extended themselves to take advantage of the soaring stock market and expanding credit.
In 1920-1921 there was an acute recession, followed by the prolonged recovery throughout the 1920s. The Federal Reserve expanded credit, by setting below market interest rates and low reserve requirements that favored big banks, and the money supply actually increased by about 60% during the time following the recession. The phrase "buying on margin" entered the American vocabulary at this time as more and more Americans over-extended themselves to take advantage of the soaring stock market and expanding credit.
Yeah. It sounds like the 2000s. It sounds like little Gov't intervention, regulation, or monitoring. That was the stance of Harding, Coolidge, and Hoover.
Yeah. It sounds like the 2000s. It sounds like little Gov't intervention, regulation, or monitoring. That was the stance of Harding, Coolidge, and Hoover.
Yes they were republican presidents too. However the worst days of the depression were from FDR, However he adapted Keysnian policies and there were very limited improvements in the economy, yet unemployment continued to rise under his presidency. None of the programs the US goverment did then really help bring recovery, and it was only via external threats which help the US bring about recovery such as when the US began to rearm then there was signs of the recovery.
Nazi germany has to take the credit of completly recovering from the depression of the 1930s, and unemployment drastically reduced, and they adapted an Keynsian economic policy, such as having public works programs such as building the autobarns, yet it was much more focused on military build up of the country. But the main aim for the Nazis was not to increase economic growth but prepare for war.
Yes they were republican presidents too. However the worst days of the depression were from FDR, However he adapted Keysnian policies and there were very limited improvements in the economy, yet unemployment continued to rise under his presidency. None of the programs the US goverment did then really help bring recovery, and it was only via external threats which help the US bring about recovery such as when the US began to rearm then there was signs of the recovery.
Nazi germany has to take the credit of completly recovering from the depression of the 1930s, and unemployment drastically reduced, and they adapted an Keynsian economic policy, such as having public works programs such as building the autobarns, yet it was much more focused on military build up of the country. But the main aim for the Nazis was not to increase economic growth but prepare for war.
Expenditures on war (in Germany or in the US) are still the sort of massive infusions of government capital that fall under the label of "Keynesian economics". It wasn't the war that improved the US economy. It arguably the money spent on the war, massive conscription, increase in manufacturing capability, etc.
But that's neither here nor there, if we're talking about the earlier depression.
It can also be argued that while FDR's New Deal didn't end the depression, it did help to stave off some of its most dire effects. As bad as things were, they could have been MUCH worse considering the fact that capital had largely dried up for most folks.
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