5 Causes Of The Great Depression Essay

5 Causes Of The Great Depression Essay-26
Why did the Great Depression happen, and could it ever happen again?The Depression's causes have been a longtime subject of debate by historians and economists, though there seems to be a consensus that the economic disaster was the result of multiple factors — some of which led to the event, while others worsened or prolonged it.But the high interest rates made it tough for businesses to borrow to weather the hard times, and many went bankrupt as a result. wasn't the only country with such problems, according to Nathaniel Cline, an assistant professor of economics at the University of Redlands and an expert on economic history.

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And while the nation's economy, the financial system and government regulation have changed considerably since the 1920s and 1930s, experts warn that we're still not immune to some of the same risks that contributed to the catastrophe.

Worse yet, some mistakes of that era are now being repeated.

Starting in 1928, the Fed — hoping to put the brakes on Wall Street speculators who were investing borrowed money — started raising interest rates.

That policy succeeded a little too well, as evidenced by the stock market's catastrophic drop in October 1929. — like many other countries — was on the Gold Standard, meaning that the dollar was redeemable in gold and pegged to its value.

Here's a list of five factors that helped lead to the Great Depression: Robert S.

Mc Elvaine, a history professor at Millsaps College in Mississippi and author of "The Great Depression: America 1929-1941," says that the U. shifted during the 1920s to an economy heavily dependent upon consumption of mass-produced goods, ranging from automobiles to radios.And Congress in 2017 passed a massive tax cut package, which most Americans see as not benefiting them, according to this April 8 NBC-Wall Street Journal poll.There's a difference between investing and speculating, which Investopedia defines as putting your money into high-risk investments in hopes of making a killing.That's because its board can use monetary policy — control of the supply of money and credit — to stimulate the economy when it needs a boost, or to put on the brakes when inflation is starting to creep upward.But in a 2004 lecture, former Fed Chairman Ben Bernancke detailed his theory that 90 years ago, the Fed dropped the ball with policy blunders that helped cause and prolong the Great Depression.Circa-1920s income inequity was exacerbated by a series of tax cuts pushed through Congress by Secretary of the Treasury Andrew W. As one of the world's richest men, Mellon personally benefited from the cuts more than practically all the taxpayers in the state of Nebraska, as one political opponent of the bill pointed out, according to this 2017 Washington Post essay by Mc Elvaine.Ninety years later, income inequality is growing, as this 2018 Pew Research Center study details, and it's a threat to an economy which depends upon personal consumption of two-thirds of its economic output.On the other hand, as a candidate, Donald Trump said that bringing back the Gold Standard "would be very hard to do, but, boy, would it be wonderful," according to this 2016 NPR story.As President, he considered nominating to the Fed board Herman Cain, who wrote this 2012 Wall Street Journal article which advocated redefining the dollar "as a fixed quantity of gold," though in a recent interview Cain backed away from that position, and Stephen Moore, another past Gold Standard advocate, who told CNN that he now favored pegging the currency to "whole basket of commodities.” Both later withdrew from consideration in the face of political opposition. The idea was to keep other countries from hurting U. manufacturers by flooding the market with lower-priced products, but when those countries responded by imposing their own tariffs, the result was a ruinous global decline in trade that deepened and lengthened the Great Depression.Even after the stock market collapsed, the Fed kept increasing interest rates, Bernanke noted. (Here's an Investopedia article on the Gold Standard.) When panicked investors started trading their dollars for gold, the Fed moved to thwart them."To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them," Bernanke explained in his speech.


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