Comparison of the great depression and

A s-era bread line in New York City. Library of Congress photo When President Barack Obama was inaugurated in Januaryhe inherited a horrendous economy. But was the economy back then really worse than it was during the Great Depression? In a recent interview, Obama indicated that it was.

Comparison of the great depression and

Money supply decreased considerably between Black Tuesday and the Bank Holiday in March when there were massive bank runs across the United States. There are also various heterodox theories that downplay or reject the explanations of the Keynesians and monetarists.

Similarities

The consensus among demand-driven theories is that a large-scale loss of confidence led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets.

Holding money became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand.

Monetarists believe that the Great Depression started as an ordinary recession, but the shrinking of the money supply greatly exacerbated the economic situation, causing a recession to descend into the Great Depression.

Economists and economic historians are almost evenly split as to whether the traditional monetary explanation that monetary forces were the primary cause of the Great Depression is right, or the traditional Keynesian explanation that a fall in autonomous spending, particularly investment, is the primary explanation for the onset of the Great Depression.

There is consensus that the Federal Reserve System should have cut short the process of monetary deflation and banking collapse.

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If they had done this, the economic downturn would have been far less severe and much shorter. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment.

Keynes' basic idea was simple: As the Depression wore on, Franklin D.

Comparison of the great depression and

Roosevelt tried public worksfarm subsidiesand other devices to restart the U. According to the Keynesians, this improved the economy, but Roosevelt never spent enough to bring the economy out of recession until the start of World War II. Real gross domestic product in Dollar blueprice index redmoney supply M2 green and number of banks grey.

Friedman and Schwartz argued that the downward turn in the economy, starting with the stock market crash, would merely have been an ordinary recession if the Federal Reserve had taken aggressive action.

Comparison of the great depression and

I would like to say to Milton and Anna: Regarding the Great Depression, you're right. But thanks to you, we won't do it again. Friedman and Schwartz argued that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.

This interpretation blames the Federal Reserve for inaction, especially the New York branch. By the late s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession.

Great Depression - Wikipedia

This credit was in the form of Federal Reserve demand notes. During the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit.

On April 5,President Roosevelt signed Executive Order making the private ownership of gold certificatescoins and bullion illegal, reducing the pressure on Federal Reserve gold.

When threatened by the forecast of a depression central banks should pour liquidity into the banking system and the government should cut taxes and accelerate spending in order to keep the nominal money stock and total nominal demand from collapsing.

Outright leave-it-alone liquidationism was a position mainly held by the Austrian School. The idea was the benefit of a depression was to liquidate failed investments and businesses that have been made obsolete by technological development in order to release factors of production capital and labor from unproductive uses so that these could be redeployed in other sectors of the technologically dynamic economy.

They argued that even if self-adjustment of the economy took mass bankruptcies, then so be it. Bradford DeLong point out that President Hoover tried to keep the federal budget balanced untilwhen he lost confidence in his Secretary of the Treasury Andrew Mellon and replaced him.Nov 02,  · A Short History of the Great Depression.

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By Nick Taylor, the author of “American-Made” (), a history of the Works Progress Administration.. The Great Depression was a . How does the Great Recession compare with the Great Depression? 1 Now that we’ve established the differences between a recession and a depression, we can start looking at the differences and similarities between the Great Depression of the s and the Great Recession we recently experienced in the late s.

Talk of a depression isn't real to them because things are, in fact, so different from the s.

Differences

To most people, a depression means '30s-style conditions, and since they don't see that, they can't imagine a depression. That's because they know what the last depression was like, but they don't know what one is.

It's hard to visualize something . Great Depression vs. 'Great Recession' Comparisons between this economic recession and the Great Depression are common, but the . Start studying Comparison of Great Depression and Recession (Econ). Learn vocabulary, terms, and more with flashcards, games, and other study tools.

The Great Depression was a main factor in the implementation of social democracy and planned economies in European countries after World War II (see Marshall Plan).

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