Causes Of The Great Depression Research Articles

Great Depression: Black Tuesday, Impact & Response

This paper will cover the cause of the Great Depression, including the stock market crash on Black Tuesday and how it affected stockholders, deflation on pricing of goods, fall of banks caused by increasing numbers of default loans, and bankruptcy of businesses. The end of the Great Depression will be explained with how the New Deal program and WWII war time economy helped soothen the US economy and hardships of the people, and how it finally ended after the US government minimize the control on the country’s economy. Impact of the Great Depression will also be examined. Including how the depression caused homelessness, poverty, unemployment, health concerns and loss of hope for millions of people at the time. Lasting impacts of the Great Depression also affected the future generations, including acts passed during the Great Depression that are still viable today, lasting landmarks, how the Great Depression left a psychological effect within past generation’s mind, and how the case set an example for historians and economists to study for preventing potential depression in the future.

High School History Textbooks and the Causes of the Great Depression: Missing the Obvious

Years ago, it became established that the severity and length of the Great Depression were due largely to misguided Federal Reserve monetary policy and the resulting catastrophic bank failures. This result is confirmed by surveys of scholars in the area and books specifically written on economic history. Yet the leading textbooks used in high school US history fail to reflect these findings. The texts (1) tend to ignore the recognized causes of the Great Depression’s severity and (2) overstate the role of other causes rejected by the majority of economic historians. After laying out this curious disjuncture, this article presents curricular resources to help high school teachers more accurately present the Great Depression’s causes.

Milton Fridman - život i naučni doprinosi

The text is about the life and work of one of the most influential economists of the last century - Milton Friedman. The paper discusses some of Friedman's greatest contributions to economic theory and practice, starting with the earliest life of Milton Friedman, and the historical circumstances that were of decisive influence on his life. An analysis of several of Friedman's most significant works, written mainly in the years spent at the University of Chicago, examines Friedman's contribution to economic theory. Friedman's contribution to the reaffirmation of quantitative money theory and consumption analysis, controversial interpretation of the causes of the Great Depression, critique of the Phillips curve, with reference to the Keynesian-monetarist debate and Friedman's contribution to the methodology of economics are discussed. The last part of the paper presents the position on Friedman's socio-political influence on a global level. There is talk of Friedman's contribution to strengthening the concept of liberalism, affirmation of the ideas of the free market, individual freedom and personal integrity, while reducing the regulatory role of the state in the economy.

De la gran crisis a la gran depresión de los 2020’s

El objetivo de esta reflexión postkeynesiana es hacer alusión a las causas de la Gran Depresión de los 2020’s y como el impacto del paro económico en China desintegró la continuidad del proceso de acumulación a nivel internacional. Las decisiones económico-políticas entorno al confinamiento de la población que tomó el gobierno de China para enfrentar al COVID-19 disparó las condiciones de fragilidad e incertidumbre prevalecientes a nivel internacional y tomó por sorpresa al resto del mundo. Ante la pandemia declarada y el paro productivo para frenar el contagio del virus, se desplegaron pronósticos mostrando la frágil situación mundial ante la especulación financiera y el endeudamiento tanto de los grandes corporativos no financieros, como del endeudamiento soberano de muchos países. China enfrentará en el mediano plazo moratorias e incumplimientos frente a las inversiones llevadas a cabo en el marco de la Ruta de la Seda particularmente en América Latina. Hoy el mundo sufre una caída abismal y prolongada.

The great depression as a global currency crisis: An Argentine perspective

Many of the works that have tried to understand the proximate causes of the Great Depression have emphasized the consequences of maintaining the Gold Standard during the interwar period, as its innate inflexibility prevented the use of expansive monetary policies and generated recessionary deflationary processes. Another perspective, both complementary and different, is that offered by new works that consider the Great Depression as to some extent a consequence not so much of a Gold Standard per se, but of the return to redemability at an overvalued parity after the Great War. The novelty of this new approach is to stress the negative effect of maintaining an unbalanced price for the metal over time. The models that have analyzed the currency crises suffered in recent decades by many Latin American countries help to understand the path that led the world to the Great Depression, with the convertibility regime applied in Argentina between 1991 and 2001 being particularly relevant.

Buried in the Vaults of Central Banks: Monetary Gold Hoarding and the Slide into the Great Depression

I study whether monetary gold hoarding was the main cause of the Great Depression in a structural VAR analysis. The notion that monetary forces played an important role in bringing about the depression is well established in the narrative literature, but has more recently met some skepticism by formal macroeconometric work. In deliberate contrast to the existing macroeconometric literature, the paper i) uses a newly-assembled monthly data set of the interwar world economy, and ii) models monetary disturbances as shocks to central bank gold demand. Based on a monetary DSGE model, the world gold reserve ratio (the ratio of central bank gold holdings to monetary liabilities) is used to describe monetary conditions. This permits the use of narrative information to sharpen shock identification in a structural VAR analysis based on sign restrictions. Monetary shocks are found to have real effects and to account for a substantial part of the collapse in prices and output during the initial slide into the Great Depression.

Comment

Another approach to validating the changes in beliefs would be to study intellectual history and, in particular, the beliefs of economists that may have evolved after the Great Recession. Lucas (2003) famously argued that “macroeconomics in this original sense has succeeded: Its central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades” (1). After the Great Recession, some people criticized this statement as too optimistic. However, Lucas was far from alone in thinking this. For instance, the most successful intermediate macro textbook cautiously said, “Because there is not yet agreement on the causes of the Great Depression, it is impossible to rule out with certainty another depression of this magnitude…. Yet most economists believe that the mistakes that led to the Great Depression are unlikely to be repeated” (Mankiw 2006, 323). But as a subsequent edition of the same intermediate macro textbook notes, “In 2008 the US economy experienced a financial crisis, followed by a deep recession. Several of the developments during this time were reminiscent of the events during the 1930s, causing many observers to fear that the economy might experience a second Great Depression” (Mankiw 2012, 348). In the end, indeed, Lucas and Mankiw were proven right: the Great Recession did not turn into a Great Depression. As Mankiw (2012) notes, “Policymakers could take some credit for having averted another Great Depression” (349).

Can Europe Prosper Without the Common Currency? A Historical Perspective

The Eurocrisis displays an astonishing similarity to the causes of the Great Depression in the form of massive current account imbalances, destabilising capital flows, financial fragility, and the commitment to defending a fixed exchange rate arrangement by means of austerity and internal devaluation. From the interwar economic and political disaster Europe eventually drew the lesson that internal balance had to enjoy priority over external balance, giving rise to a three-decade long period of unprecedented economic growth after the Second World War. As Europe has again stumbled into many of the policy errors that caused the Great Depression, it will need to relearn some of these lessons. In particular, the paper suggests that Europeanisation has gone too far and that rather than completing the monetary Union, Europe's prosperity and political stability would be better served by compartmentalisation of financial markets, vertical industrial policies and an escape clause in the common currency allowing for temporary exit in case of fundamental disequilibria.

Prelude to Glass-Steagall: Abusive Securities Practices by National City Bank and Chase National Bank During the 'Roaring Twenties'

From the late 1990s through 2008, the United States experienced the largest boom-and- bust cycle in its securities and housing markets since the “Roaring Twenties” and the Great Depression. Scholars have studied the events that led to the recent financial crisis and have compared those events to the causes of the Great Depression. In particular, analysts have considered whether “universal banks” – financial conglomerates that control deposit-taking banks as well as securities broker-dealers – played central roles in both crises.Congress responded to the Great Depression by adopting the Glass-Steagall Act of 1933, which outlawed first-generation universal banks and established a wall of separation between commercial banks and securities firms. During the 1980s and 1990s, regulators and courts steadily undermined Glass-Steagall, and Congress finally repealed the statute in 1999. Is it more than a coincidence that the demise of Glass-Steagall was followed by the most spectacular economic boom since the 1920s and the most serious financial and economic crisis since the 1930s? This article is part of a larger project in which I plan to examine the rise and fall of first-generation universal banks during the 1920s and 1930s and to compare their experience with the performance of second-generation universal banks during the 1990s and 2000s.As described in this article, first-generation universal banks became leading underwriters and distributors of securities in the United States during the 1920s. The preeminent universal banks of the 1920s were the two largest U.S. commercial banks – National City Bank (National City) and Chase National Bank (Chase). National City and Chase and their securities affiliates earned huge profits during the economic boom of the 1920s but suffered massive losses during the Great Depression. Both banks received bailouts from the Reconstruction Finance Corporation in December 1933.The Pecora Committee’s investigation in 1933 revealed that National City and Chase used deceptive and manipulative techniques to sell massive volumes of foreign bonds and other high-risk securities to ordinary investors and smaller financial institutions. Both banks made unsound loans to support the activities of their securities affiliates. Both banks organized trading pools to pump up the prices of their own stocks as well as the stocks of favored clients. Insiders took advantage of both banks’ securities operations to reap extraordinary financial gains. Revelations of both banks’ securities abuses and their top executives’ self-dealing triggered widespread public outrage and generated public support for enactment of the Glass-Steagall Act as well as the Securities Act of 1933 and the Securities Exchange Act of 1934. The abuses and conflicts of interest that occurred at National City and Chase illustrated the potential dangers of allowing commercial banks to affiliate with securities broker-dealers. The evidence produced by the Pecora Committee supported Glass-Steagall’s fundamental premise that universal banks created intolerable hazards that could not be resolved without dismantling the universal banking model. National City and Chase mobilized their deposits, lending resources, and retail branches to underwrite and sell high-risk securities to unsophisticated investors who trusted in both banks’ presumed soundness and investment expertise. National City and Chase exhibited pervasive conflicts of interest that caused both banks to make unsound loans to their securities affiliates, to investors who purchased securities from their affiliates, and to companies that issued securities underwritten by their affiliates.The disastrous experiences of National City and Chase demonstrated the clear dangers of allowing commercial banks to use their deposits and lending resources to promote speculative underwriting and trading operations. The near-collapse and bailouts of both banks also highlighted the systemic risks that arise when major banks establish close links with the securities markets.The hazards of universal banking became manifest again in the 1990s and 2000s. Second-generation universal banks played leading roles in securitizing and marketing high-risk, asset-backed securities (and related derivatives) that helped to precipitate the greatest worldwide boom and crash since the Great Depression. To prevent a collapse of global financial markets, government officials in the United States, United Kingdom, and Europe rescued troubled universal banks and supported not only their banking units but also their securities and other nonbanking subsidiaries. U.S. regulators arranged emergency deals that (1) converted two leading securities firms (Goldman Sachs and Morgan Stanley) into universal banks and (2) enabled existing universal banks (JPMorgan Chase and Bank of America) to become even larger by acquiring troubled securities firms. The foregoing government measures confirmed the existence of a “too-big-to-fail” (TBTF) policy that embraced the banking system as well as major segments of the securities and insurance markets. The Dodd-Frank Act of 2010 promised to end TBTF. However, many analysts believe that goal is a long way from being accomplished. As policymakers evaluate the desirability of further reforms to end TBTF, they should reconsider the lessons of the Great Depression as well as the wisdom of Glass-Steagall’s regime of structural separation between the banking industry and the securities markets.

The Midas paradox: financial markets, government policy shocks, and the Great Depression

Economic historians have made great progress in unraveling the causes of the Great Depression, but not until Scott Sumner came along has anyone explained the multitude of twists and turns the economy took. In The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression, Sumner offers his magnum opus-the first book to comprehensively explain both monetary and non-monetary causes of that cataclysm. Drawing on financial market data and contemporaneous news stories, Sumner shows that the Great Depression is ultimately a story of incredibly bad policymaking-by central bankers, legislators, and two presidents-especially mistakes related to monetary policy and wage rates. He also shows that macroeconomic thought has long been captive to a false narrative that continues to misguide policymakers in their quixotic quest to promote robust and sustainable economic growth. The Midas Paradox is a landmark treatise that solves mysteries that have long perplexed economic historians, and corrects misconceptions about the true causes, consequences, and cures of macroeconomic instability. Like Milton Friedman and Anna J. Schwartz's A Monetary History of the United States, 1867-1960, it is one of those rare books destined to shape all future research on the subject.

Did US Consumers 'Save for a Rainy Day' Before the Great Recession?

The weak implication of the permanent income hypothesis, entailing that private savings decisions reect rational expectations about future income, is still widely regarded as a relevant for quantitative macro modeling. We investigate the ‘saving for a rainy day’ hypothesis by testing weak exogeneity of income and consumption with respect to cointegration parameters, and by exploring the direction of Granger causality between consumption and income. We use both aggregate macro time series for the US, as well as disaggregate quarterly data for the 100 largest US Metropolitan Statistical Areas (MSAs). The common sample is 1980q1-2007q4, i.e., a period that starts with the stagation era and ends with the Great Moderation. Since the exogeneity of consumption and the endogeneity of income with respect to the savings rate, is a premise for the belief in a low valued scal policy multiplier, our nding that exogeneity of consumption can be rejected more often than it can be accepted, has relevance, both for analysis of the causes of the Great Depression and for discussing the eectiveness of scal policy. We also give proof that house price changes is likely to have aected consumption and income, before, during and after the Great recession.

Wall Street and Main Street: the macroeconomic consequences of New York bank suspensions, 1866–1914

Before the formation of the Federal Reserve, banking panics were routine events in the United States. During the most severe episodes, banks in cities across the country would often suspend or restrict the par convertibility of their demand deposit liabilities. In diagnosing the causes of the Great Depression, Friedman and Schwartz famously regard these local initiatives as a second best solution, which in the absence of an effective lender of last resort would have prevented the rash of bank failures during the early 1930s and their dire monetary and real impacts. Recent research in macroeconomics though has raised the possibility that banks’ suspension of payments might also have negative real effects albeit through changes in aggregate supply such as the financing of working capital. We would expect to observe these negative shocks during the pre-Fed era, because the decentralized, private interbank payments network was especially vulnerable to systemic disruptions such as suspensions by New York and other money center banks. Reports in national trade periodicals and local newspapers during suspension periods offer many accounts of factories closing because of the inability to obtain currency for weekly payrolls and “domestic exchange” to finance internal trade. We corroborate these observations with more systematic econometric evidence at the national and regional levels. Our results show that controlling for the overall contraction and bank failures, suspension periods were associated with a statistically significant and quantitatively large decline in real activity, on the order of 10–20 %.

Integrated Reporting – a concept whose time has come

85E JAARGANG NOVEMBER 535 Thema The history of accountancy establishes that changes to reporting standards and practices occurred as a result of global events or crises. It was said that one of the causes of the Great Depression of the 1930s was the value of assets on the basis of mark to market. This type of valuation was consequently abandoned in some jurisdictions, but was retained in others. The great depression also resulted in the implementation of generally accepted standards of accounting in the United States. It also led to stock issues as a leading method of financing expansion. As stockholders, rather than bankers, became the primary audience of financial statements, the income statement began to take centre stage over the balance sheet. Other factors, such as income taxation and cost accounting, shifted the focus to revenue and profit.

Comment on Casey Mulligan: Keynes in Both Fresh and Salt Water

Casey Mulligan suggested in The Economists' Voice that this recession was caused by "something [that] made real wages high and employment low." This coincides with his own view of the causes of the Great Depression. The similarity inevitably brings back General-Theory-Keynes, according to Da Silva, and justifies the suspicion of some salt water economists that Mulligan is blaming both downturns on laziness.

Global economic meltdown and the Nigerian economy

The paper examines the global meltdown and its impact on the Nigerian economy. Through a historical excursion, it shows how the causes of the Great Depression and the current crisis are related. It situates the meltdown in the way America has tried to assert its hegemony in the global politics. This has resulted in the building of military complexes, the neglect of its productive and competitive sectors and its inability to meet its financial and trade obligations to the rest of the world. Other identified causes are the housing bubble and predatory lending by its financial giants. The crisis has inflicted so much harm on the Nigerian economy by resulting in reduction in foreign investment in the country, a fall in the value of the naira and a decline in government revenue and expenditure due to a fall in crude oil price among others. The paper therefore recommends some of the steps Nigeria should take to counteract the impacts as well as protect the economy from the measures taken by the developed countries to cushion their economies against the meltdown. Among its recommendations include the need to rely less on the advice of Bretton Woods Institutions and on the international currency exchange reserve system.

The General Theory and monetary policy: Investment versus inflation

Keynes's theory of investment and the economic cycle is set out. Against this theory it is argued that the current monetary policy framework is not credible. Rather, given its implicit endorsement of financial liberalisation, it is, and has proved, deeply dangerous. Keynes advocated policies aimed at setting a low long-term rate of interest. Financial liberalisation has led to the dear rates that Keynes understood as the cause of the Great Depression. The discussion also examines Keynes's vigilant approach to inflation and argues that the inflation of the 1970s was connected with liberalisation not Keynes. The loss of the central role for investment and the pre-occupation with inflation in post-Keynesian economics is traced. Finally events from the golden age to the present debt-deflation are examined according to this perspective.

Nationalism in United States Music Education during World War II

In the early decades of the twentieth century, educators in the United States were not concerned with promoting musical nationalism through their teaching, in contrast with many of their European contemporaries. Rather, they wished cultivate the taste and expand the international perspectives of their students. They sought immerse them in the musical works of European master composers on the basis of their belief that exposure and involvement in music, a morally elevated art, would have liberating and elevating effects. Influential educator James Mursell (and others) wrote rhapsodically and at length about the value of in education, asserting that music, in its essence, expresses and embodies emotion, and that students could find personal happiness through the self-fulfillment that stems from musical involvement. (1) Simultaneously, many educators sought broaden their students' international perspectives by introducing them the music of many lands and peoples, and the profession's leaders held that an important aim of their work was enable children to know, love, and appreciate in as many forms as possible. (2) However, after the German invasion of Poland in September 1939, which began World War II in Europe, the focus on as an art and orientations toward musical internationalism began lose their centrality in public school education in the United States. Music educators' fears caused them regard their teaching in a very different way. Realizing that they could play an important role in the growing crisis, they largely set aside their artistic goals, refocusing their instruction and selecting for the purposes of contributing the nation's solidarity and bolstering the morale of the nation's populace. This change in their orientation did not stem from a highly debated philosophical or theoretical shift within the profession, but rather emerged gradually as citizens became increasingly distraught over the war in Europe and fearful that they might be engaged in it. (3) Responding the War in Europe Throughout the late 1930s, the American public was largely pacifist and disinclined give attention the expansionist efforts of the growing totalitarian regimes in Germany, Italy, and Japan. Some citizens believed the causes of the Great Depression could be traced back the nation's involvement in World War I, and they felt that staying clear of all foreign problems was the way future security. President Franklin D. Roosevelt said nothing at all about foreign relations in his second inaugural address in 1937. But when France fell the German and Italian armies on May 10, 1940, and only Great Britain stood between Nazi Germany and the United States, the strong pacifism and comfortable isolationism of the American public began be shaken. When the President addressed a joint session of the Senate and House of Representatives on May 16, 1940, his frustration with the isolationist stance of the citizenry and the Congress became evident as he spoke of the growing European threat. He said: Let us measure our strength and our defense without self-delusion. The clear fact is that the American people must recast their thinking about national protection. (4) Roosevelt's impassioned speech finally convinced the reluctant Congress appropriate $2.5 billion for military equipment and installations. On September 6th, he took the additional step of signing into law the Selective Training and Service Act of 1940, creating the country's first peacetime military draft. At the same time, the United States government began efforts raise citizens' awareness of the importance of national unity and foster concern about the nation's common welfare via broadcasts and publications; phrases such as sustain morale, mobilize pride and faith, enliven hope and devotion, strengthen loyalty, and develop a sense of belonging began be used in print and on the radio by the Office of National Defense and other agencies, as they sought raise public awareness of the threat of war. …

The Great Depression in High School Social Science Textbooks : Critiques and Suggestions

The Great Depression is one of the most important economic incidents in the twentieth century. A significant and long-lasting impact of this event is the rise of the government intervention to the economy. Under the catastrophic downturn of the economic condition worldwide, people required their government to play an active role for economic recovery, and this mentalite prolonged even after the Second World War. Social science textbooks taught at Korean high schools mostly referred to the Great Depression for explaining the reason of government intervention in economy. However, the mainstream view commonly found in the textbooks provides a misleading theological interpretation. It argues that inherent flaws of the market economy causes over-production/under-consumption, and that this mismatch ends up with economic crisis. The chaotic situation was resolved by substitution of the governments for the market, and the New Deal was introduced as the monumental example (‘laissez-faire economy→over-production→the Great Depression→government intervention→economic recovery’). Based on economic historians’ researches for past three decades, I argue that this mainstream view commits the fallacy of ex-post justification. Unlike what the mainstream view claims, the Great Depression was neither the result of the ‘market failure’, nor the recovery from the Great Depression but was due to successful government policies. For substantiating this claim, I suggest three points. First, blaming the weakness or instability of the market economy as the cause of the Great Depression is groundless. Unlike what the textbooks describe, the rise of the U.S. stock price during the 1920s cannot be said as a bubble, and there was no sign of under-consumption during the 1920s. On the contrary, a new consensus emerging from the 1980s among economic historians illustrates that the Great Depression was originated from ‘the government failure’ rather than from the ‘market failure’. Policymakers of European countries tried to return to the gold standard regime before the First World War, but discrepancies between this policy and the reality made the world economy vulnerable. Second, the mainstream view identifies the New Deal as Keynesian interventionism and glorifies it for saving the U.S. economy from the crisis. However, this argument is not true. The New Deal was not Keynesian at all. What the U.S. government actually tried was not macroeconomic stabilization but price and quantity control. In addition, New Deal did not brought about economic recovery that people generally believe. Even after the New Deal, industrial production or employment level remained quite low until the late 1930s. Lastly, studies on individual New Deal policies show that they did not work as they were intended. For example, the National Industrial Recovery Act increased unemployment, and the Agricultural Adjustment Act expelled tenants from their land. Third, the mainstream view characterizes the economic order before the Great Depression as laissez-faire, and it tends to attribute all the vice during the Industrial Revolution era to the uncontrolled market economy. However, historical studies show that various economic and social problems of the Industrial Revolution period such as inequality problems, child labor, or environmental problems cannot be simply ascribed to the problems of the market economy. In conclusion, the remedy for all these problems in high school textbooks is not to use the Great Depression as an example showing the weakness of the market economy. The Great Depression should be introduced simply as a historical momentum that had initiated the growth of government intervention. This reform of high school textbooks is imperative for enhancing the right understanding of economy and history.

Roosevelt, the Great Depression, and the Economics of Recovery

Historians have often speculated on the alternative paths the United States might have taken during the Great Depression: What if Franklin D. Roosevelt had been killed by one of Giuseppe Zangara's bullets in Miami on February 17, 1933? Would there have been a New Deal under an administration led by Herbert Hoover had he been reelected in 1932? To what degree were Roosevelt's own ideas and inclinations, as opposed to those of his contemporaries, essential to the formulation of New Deal policies? In Roosevelt, the Great Depression, and the Economics of Recovery, the eminent historian Elliot A. Rosen examines these and other questions, exploring the causes of the Great Depression and America's recovery from it in relation to the policies and policy alternatives that were in play during the New Deal era. Evaluating policies in economic terms, and disentangling economic claims from political ideology, Rosen argues that while planning efforts and full-employment policies were essential for coping with the emergency of the depression, from an economic standpoint it is in fact fortunate that they did not become permanent elements of our political economy. By insisting that the economic bases of proposals be accurately represented in debating their merits, Rosen reveals that the productivity gains, which accelerated in the years following the 1929 stock market crash, were more responsible for long-term economic recovery than were governmental policies. Based on broad and extensive archival research, Roosevelt, the Great Depression, and the Economics of Recovery is at once an erudite and authoritative history of New Deal economic policy and timely background reading for current debates on domestic and global economic policy.

Not Guilty? Agriculture in the 1920s and the Great Depression

Agricultural distress in the 1920s is routinely quoted among the causes of the Great Depression. This article challenges the conventional wisdom. World agriculture was not plagued by overproduction and falling terms of trade. The indebtedness of American farmers, a legacy of the boom years 1918–1921, did jeopardize the rural banks, but the relation between their crises, the banking panic of 1930, and the Great Depression is tenuous at best.