Government Intervention and the Causes of the Great Depression

The economic business cycle of the world is its own living and breathing entity expanding and contracting with imprecise balances involving supply and demand. The expansions and contractions also known as booms and recessions support a delicate equilibrium of checks and balances, employment and unemployment. The year 1929 marked the beginning of the downward spiral of this delicate economic balance known as The Great Depression of the United States of America. The Great Depression is by far the most significant economic event that occurred during the twentieth century making other depressions pale in comparison. As a result, it placed the world’s political and economic systems into a complete loss of credibility. What transforms an ordinary recession or business cycle into an authentic depression is a matter of dispute, which caused trepidation among economic theorists. Some claim the depression was the result of an extraordinary succession of errors in monetary procedure. Historians stress structural factors such as massive bank failures and the stock market crash; economists hold responsible monetary factors such as the Federal Reserve’s actions when they contracted the currency distribution, and Britain's attempt to return their Gold Standard to pre-World War parities. Subsequently, there are the theorists such as the monetarists, who presume that it began as a normal recession, however many policy errors by the monetary establishment forced a reduction in the money supply, which worsened the economic condition, thereby turning the normal recession into the Great Depression. Others speculate that it was a failure of the free market or a failure of the government in their efforts to regulate interest rates, slow the occ...

... middle of paper ...

... Ronald W. "Pre-Keynesian Monetary Theories of the Great Depression: What Ever

Happened to Hawtrey and Cassel?” (1991):

"Economics of Crisis: Policies: Lessons from the Great Depression, 1929.” Economics of Crisis.

http://www.economicsofcrisis.com/economics_of_crisis/depression.html (accessed June 26, 2010).

"Great Depression: The Concise Encyclopedia of Economics | Library of Economics and

liberty.” Library of Economics and Liberty.

http://www.econlib.org/library/Enc/GreatDepression.html (accessed June 26, 2010).

Greenspan, Alan. "321gold: Gold and Economic Freedom by Alan Greenspan 1966.” 3 2 1 g o l

d ... Welcome! http://www.321gold.com/fed/greenspan/1966.html (accessed June 26,

2010).

"Sliding into the Great Depression.” Brad DeLong's Website Home Page.

http://econ161.berkeley.edu/TCEH/Slouch_Crash14.html (accessed June 26, 2010).