Cecchetti, Stephen G. "Understanding the Great Depression: Lessons for Current Policy ." Monetary Economics (1997): 1-26. This article is about the circumstances that led to the collapse of the economy in 1929. It relates to my research proposal because I am evaluating historic events that led to the financial crisis of 1929. The article discusses how deflation played an important role in expanding the depression, and how the Gold Standard, a monetary system in which a country’s government allows its currency unit to be freely converted into fixed amounts of gold and vice versa, was an extremely bad decision because it caused the dollar to lose its value.
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).
The depression period is needed to return the econ... ... middle of paper ... ...sion will only cause greater harm. This can be seen in the period leading up to the Great Depression. The roaring 20’s seemed to be a time of unlimited prosperity due to Federal Reserve measures which continuously gave money to banks. Instead of realizing the problem, the Fed continued to loan out money until the market ultimately crashed. During the depression period, Hoover (as well as his successors) tried to fix the economy by putting more money into it.
Ultimately the Great Depression shocked the Fed into reality, and because of this future depressions will be averted. Works Cited: Calomiris, Charles W. “Runs on Banks and the Lessons of the Great Depression” Regulation 22.1: 4-7 Friedman, Milton, and Schwartz, Anna. A Monetary History of the United States 1867-1960. Princeton , N.J.: Princeton University Press. 1963 Timberlake, Richard H. “The Roots of the Great Depression.” (Interview) Navigator.
The Course of The Great Depression The October 1987 collapse in stock prices conjured visions of 1929 and the Great Depression. Focus on this period is natural because the 32 percent decline in stock values between the market closes of October 13 and 19, 1987, was of the magnitude of--indeed, it actually exceeded--the October 1929 debacle. Focus on this period is also appropriate because, despite all that has been learned since to help assure economic stability, we cannot be completely confident that history will not repeat itself. Consequently, this first section reviews events of the Depression era. The stock market Crash of October 1929 is frequently credited with triggering the Depression.
The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit. If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the Stock Market Crash, but also on the maldistribution of wealth, an unstable economy and the wild stock market practices of the 1920’s. The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920’s.
Overall, the significance of the Wall Street Crash is a short-term factor that was overplayed and has become a factor so focused on that it took precedence throughout History. The long-term factor being the mismanagement of the Gold Standard by the Federal Bank was most significant. As History would agree, The Wall Street Crash appears to be the most convincing argument for the most significant factor of the Great depression. This view is further supported by John Maynard Keynes who argued that sharp decline in private investment (which he believed was already unstable due to what he dubbed, 'the animal spirits' of the capitalists) which led to a decline in aggregate demands was the key reason for the Great depression. this view is merited by the clear evidence that illustrates that on September 3rd, the Dow Jones industrial average had fallen to 381.2 and by October 29th, it had fallen from 326.51 to 230.07, a 29.6 percent decline in the shares on the New York Stock exchange and by November 13th it had dropped to 199.
The Presidents during this timeframe were Herbert Hoover and Franklin Delano Roosevelt. They both had their strategies to get America out of the depression. First and foremost, The Great Depression was caused by a combination of domestic and worldwide conditions. The start of the crisis began with Stock Market Crash of 1929.
This agency was the Federal Reserve Board and it was to have been the loaner of last resorts for banks in order to prevent collapses as had happened during earlier depressions. But as America sees, there is good reason to believe that the Federal actions explain many of the problems that lead up to the stock market crash and the subsequent depression. Although there are many macroeconomics schools of thought, this paper will be concentrating on two initially, Keynesian economics and Austrian School economics. Keynesian economics got its start during the Great Depression with the publication in 1936 of The General Theory of Employment, Interest, and Money, by John Maynard Keynes. Austrian School economics began much Earlier, most notably with the publication in 1871 of Carl Menger's Principles of Economics.
The Great Depression tested America’s political organizations like no other event in United States’ history except the Civil War. The most famous explanations of the period are friendly to Roosevelt and the New Deal and very critical of the Republican presidents of the 1920’s, bankers, and businessmen, whom they blame for the collapse. However, Amity Shlaes in her book, The Forgotten Man: A New History of the Great Depression, contests the received wisdom that the Great Depression occurred because capitalism failed, and that it ended because of Roosevelt’s New Deal. Shlaes, a senior fellow at the Council on Foreign Relations and a syndicated financial columnist, argues that government action between 1929 and 1940 unnecessarily deepened and extended the Great Depression. Amity Shlaes tells the story of the Great Depression and the New Deal through the eyes of some of the more influential figures of the period—Roosevelt’s men like Rexford Tugwell, David Lilienthal, Felix Frankfurter, Harold Ickes, and Henry Morgenthau; businessmen and bankers like Wendell Willkie, Samuel Insull, Andrew Mellon, and the Schechter family.