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The Great Depression

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Introduction

The Great Depression By Drake Parker Most everyone has at least heard of the Great Depression that hit America by storm in the early twentieth century. Even though people are taught about the Great Depression, I personally think that a lot of people do not understand the severity that it caused and the livelihoods that it forever changed. The Great Depression, which lasted over a period of ten years, resulted in a lot of heartache for many nations worldwide (Fraser, 2010). As for the United States, the worst of the Great Depression harbored between 1929 through 1933 (Fraser, 2010). The Great Depression went down into history as being the worst traumatic economic moment for the United States (Paul Evans). It is still recognized for being the longest and severe depression that has ever been experienced by the Western hemisphere (Romer). The Great Depression originated in the United States causing drastic declines in output, severe unemployment, and heightened deflation in almost every country of the world (Romer). To this day economist and historians are still trying to analyze what really happened in the quake of the Great Depression, along with understanding the true underlying causes that created this grave crisis (Fraser, 2010). Even though the Great Depression will be forever stamped in history books as the economic meltdown of the twentieth century, we as Americans can learn to oversee and conquer what lies before us by understanding what put us in that dark place to begin with. ...read more.

Middle

Over one-third of banks in the United Sates during the Great Depression had failed. This seemed to cause a chain reaction to the overall scheme of things (Romer). Since banks were failing there was no one to lend manufacturer?s money for investments for growth, which also meant no money coming into the banks for excess reserves for financial investment (Richardson, September 2007). The gold standard is another assumed cause of the Great Depression (Romer). There are thoughts circulating that the Federal Reserve either allowed or possibly caused the decline of the American money supply in order to preserve the gold standard. Since the United States? money is backed by gold, foreigners were likely unsure of the United Sates commitment to the gold standard (Romer). This would have undoubtedly led to a large outflow of gold which would have unfortunately made the United States devalue. This unfortunately led to the decline not only to the United States but the rest of the world as well (Romer). During the late 1920?s, there became a rise in American stocks and bonds, which in turn brought in hefty inflows of gold to the United States. Gold started flowing from other countries and into the United States due to the product contracts (Richardson, September 2007). ...read more.

Conclusion

Even though this did not increase output directly, it did allow for the expansion of these countries money suppliers without any concern for gold movements and exchange rates (Romer). Many countries saw greater recovery and took advantage in this freedom (Romer). The United States for example increased their money supply by near forty-two percent by 1937 (Romer). This monetary expansion increased globally which stemmed greatly from the gold inflow (Romer). The expansion of the monetary base, stimulated spending by lowering interest rates and making credit more widely available (Richardson, September 2007). Due to expectations of inflation, potential borrowers became confident that their profits would adequately cover payments of a loan if they chose to borrow (Richardson, September 2007). Along with this, the United States also saw a rise in consumer and business spending (Fraser, 2010). Due to the staggering amount of unemployed workers, Franklin Roosevelt issued the Workers Progress Administration under the New Deal (Fraser, 2010). This association hired the unemployed to work on government projects. Also under the New Deal was the Agricultural Adjustment Association that gave large payments to farmers (Fraser, 2010). This inevitably increased the workforce, along with production (Fraser, 2010). Even though the Great Depression ranks as one of the worst catastrophic economic events our country has ever seen, it is there that we can learn from our mistakes and strive for success in the years to come. ...read more.

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