The Great Depression :: essays research papers

IntroductionIt should be noted that all of the cures necessitate been tried and while we seem to be free of Depressions, its not cash in ones chips that business cycles have been eliminated. CausesThe Stock market place CrashThe Stock Market Crash in October of 1929 is often cited as the beginning of the Great Depression, just did it actually cause it? The answer is no. First, the cable price for a particular company merely polishs current information ab place the future income stream of that company. Thus, it is a change in available information that changes the stock price. When the Fed began to raise interest rates in early 1929, this began the tumble. However, a stock market crash could cause people to increase their liquidness preference which might lead them to hoard bills.In the August 1990 guinea pig of The Quarterly Journal of Economics, Christine D. Romer writes that "the negative effect of stock market divergence is more than strong enough to account for th e entire decline in real consumer spending on durables that occurred in late 1929 and 1930." save up MoneyPeople hoard money because they have a fluidness preference. I.e., people want to have their assets in a readily convertible form, such as money. There are several misconceptions about hive up money. First hoarding is not the same thing as saving. If I put my money into a savings account, that money is lent out to someone else who therefore spends it. Second, hoarding, by itself, cannot cause a recession or depression. As long as prices and wages get around instantly to reflect the lower amount 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 will be able to buy more goods as a result 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 money unenviable for the government to control. The Gold StandardAt the time of the Great Depression,America had a 100% gold standard for its money. This meant that all cash was backed by a government promise to redeem it in a ad hoc amount of gold (at the time, one ounce of gold was redeemable for cardinal dollars). Because the amount of money circulating in the economy is wholly reliant on the amount of gold available, the money supply is very rigid.