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The coming depression blog | July 21, 2018

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Overview of Great Depression

The crisis 1929 or the Great Depression is the period of history U.S. that followed the Black Thursday October 24 1929, the day the stock market New York is collapsed. The events of that day started an economic crisis that led to the World deflation and a significant increase in the unemployment.

Many Economists believe that the Great Depression was both caused and prolonged by the attitude of the U.S. government. Although the release mechanism of the crisis is perhaps not due to government action, many believe that economic policy incorrectly turned what should have been a stock market crash passenger in an economic crisis that lasted a decade. Two policies were particularly stigmatized by economists:

The first is the tight monetary policy of the U.S. Federal Reserve, which limits the quantity of money in the market. The second is the use of measures protectionist such as Hawley-Smoot Tariff Act, Which increased tariffs on imports in order to protect local producers endangered by international competition. In response to this policy, other countries increased their prices in turn; putting in very bad shape U.S. companies that export lived. This led to a series of rate increases that fragments the global economy.


United States’ president at that time – Herbert Hoover – Tried unsuccessfully to resolve the crisis. One of the main problems was that with deflation, the same amount of money to acquire more and more goods to as the drop in prices. Another problem was that there was no supervision of securities markets, and at the time of the collapse of many actions and plans INVESTMENTS proved insolvent or fraudulent. Unfortunately, many banks had bet their money in this dubious business, which led to the collapse of the banking system in 1932. With the collapse of the banking system, and people clinging to the little money she still possessed, there was not enough liquidity in the market that any economic activity can reverse the trend.

In Germany the unemployment rate peaked, fueling anger and disillusionment of the population. And it is promising to solve the problem of the crisis that Adolf Hitler came to power.


In 1933The United States elected him Franklin Delano Roosevelt to replace Hoover at the head of state. With an unemployment rate approaching 25% of the workforce, Roosevelt launched several programs to increase the volume of liquidity and reduce unemployment (which is what is called the New Deal). The Supreme Court initially opposed to this strong economic interventionism, contrary to its previous case law, before join it in 1937By stopping West Coast Hotel Co. v. Parrish. The New Deal is often credited with having helped to overcome the crisis. This view is challenged, especially by the classical economists, especially since the 1960s. He allowed at least limiting the dramatic social consequences of the crisis, works as described by The Grapes of Wrath or of mice and men. It also provides United States infrastructure – roads, hydroelectric – still used today.

Since the United States were still in crisis occurred when the World War 2, it is difficult to comment reliably on the success as had the New Deal on the U.S. economy. The debate remains open.

Some argue that the inherent instability of economic markets caused a crisis so deep that even interventions New Deal, As relevant as they are, could not restore the situation quickly.

Others believe that the crisis of 1929 corresponding to the period in American history when government intervention was the strongest, it reasonable to expect that government action has added to the depression, rather than address them. They shoot including an argument that after initial recovery, the economy has plunged from 1936, Was about the time the Supreme Court allowed the New Deal to take bigger.


Many believe that it is the war expenditures of the governments that revived global economic growth, but in fact, this statement is only half true. Germany and Italy were out of the crisis before the World War II by engaging in massive spending in infrastructure and equipment.

The United States

Returned to a normal level of activity during the war thanks to the large military investments, but also by employing a large proportion of the workforce in the military. Although this was dictated by events, this did not mean – on the contrary – that America was out of the crisis. And when the war came to an end, the return of millions of soldiers in their homes imposed a period of readjustment of the economy. It is this transition that was supposed to facilitate the G.I. Bill.

In other countries, such as France, Great-Britain or Netherland the war was of course caused considerable damage, rather than being an engine of economic recovery. If war can be profitable for some sectors of the economy, it usually causes an economic and social dislocation as they thwart the least of its positive effects.

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