The Great Depression :: essays research papers

IntroductionIt should be noted that all of the cures have been well-tried and while we seem to be free of Depressions, its not clear that calling cycles have been eliminated. CausesThe Stock Market go downThe Stock Market Crash in October of 1929 is often cited as the beginning of the Great Depression, but did it actually cause it? The answer is no. set-back, the root price for a ill-tempered company merely reflects current information about the future income rain buckets of that company. Thus, it is a change in available information that changes the stock price. When the supply began to raise interest rates in early 1929, this began the tumble. However, a stock market crash could cause peck to increase their liquidity gustatory sensation which might lead them to hoard money.In the August 1990 issue of The every quarter Journal of Economics, Christine D. Romer writes that "the negative effect of stock market variability is more than than strong enough to account for the entire decline in objective consumer spending on durables that occurred in late 1929 and 1930." Hoarding bullionPeople hoard money because they have a liquidity preference. I.e., people want to have their assets in a readily convertible form, such(prenominal) as money. There are several misconceptions about lay away money. First save is not the same thing as saving. If I put in my money into a savings account, that money is lent out to psyche else who then spends it. Second, hoarding, by itself, cannot cause a recession or depression. As long as prices and wages drop instantly to reflect the degrade make out of money in the economy, then hoarding causes no problems. Indeed, hoarding can even be seen as beneficial to those who dont hoard, since their money pass on be able to buy more goods as a extend of the lower prices. If a country has a gold standard, then hoarding money can make the money supply drop dramatically since a gold standard makes the quantity of mone y difficult for the political sympathies to control. The Gold StandardAt the time of the Great Depression,America had a blow% gold standard for its money. This meant that all cash was backed by a government promise to redeem it in a specific descend of gold (at the time, one ounce of gold was redeemable for twenty dollars). Because the amount of money circulating in the economy is wholly dependent on the amount of gold available, the money supply is very rigid.