Tuesday, July 14, 2009

Great Depression

The Great Depression was a worldwide economic downturn starting in most places in and ending at different times for different countries. It was the largest and most severe economic depression in the, and is used as an example of how increase in purchasing power into consumer spending far the world's economy can decline. 

The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The solution was the government must pump money into consumers' pockets.

The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply. One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. 

At that time the amount of credit the Federal Reserve could issue was limited by laws which required partial gold backing of that credit. According to this view, the root cause of the Great Depression was a global overinvestment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. 

No comments:

Post a Comment