How Did The Great Depression Affect The Economy
The Great Depression was a long-lasting economic crisis in the global economy which started in the U.S. in 1929. The Great Depression officially ended in 1940, but in reality the U.S. economy started recovering only after World War II. The Great Depression was synchronized and comprehensive and affected all the sectors of the global economy.
The beginning of the Great Depression in the US is considered October 29, 1929, the so-called “Black Tuesday.” The stock market collapsed, in one day the shares fell by 10 billion dollars, which meant the disappearance of 10 billion dollars of credit money. Because of this fall 20-25 million people in the U.S. suffered losses. Before the beginning of the Great Depression the rate of the U.S. gold reserve
growth was slower than the development of economy. This led to the emergence of hidden inflation, as the government printed new money for the rapid growth of the economy. Thus, the dollar’s gold supply was undermined, the budget deficit grew, and the Federal Reserve System lowered the discount rate. The situation occurred where the growth of labor productivity in industry declined, and the amount of pseudo-money (bills, receipts, etc.) on the contrary increased, and this imbalance in the economy factually led to the “Black Tuesday” in 1929. The Great Depression was preceded by the rapid growth of the U.S. economy. From 1917 to 1927, the U.S. national income almost tripled. Conveyor production was invented, the stock market was rapidly developing, the number of speculative trading was growing, the real estate prices were going up. The increase in production of goods required the increase in the money supply, but the dollar was pegged to gold America was smashed and pulled into the depression by the stock market, one of the pillars of capitalism. President Herbert Hoover, a supporter of the laissez-faire principle (non-interference of the state in the economy) refused to use the tools of state power, and as a result the economic situation deteriorated. Hoover’s successor, Franklin Delano Roosevelt started the government intervention and guided the country to recovery. The conclusion seems obvious: capitalism cannot be trusted, and the state should play an active role in the economy to save us from inevitable decline.
The beginning of the Great Depression in the US is considered October 29, 1929, the so-called “Black Tuesday.” The stock market collapsed, in one day the shares fell by 10 billion dollars, which meant the disappearance of 10 billion dollars of credit money. Because of this fall 20-25 million people in the U.S. suffered losses. Before the beginning of the Great Depression the rate of the U.S. gold reserve
growth was slower than the development of economy. This led to the emergence of hidden inflation, as the government printed new money for the rapid growth of the economy. Thus, the dollar’s gold supply was undermined, the budget deficit grew, and the Federal Reserve System lowered the discount rate. The situation occurred where the growth of labor productivity in industry declined, and the amount of pseudo-money (bills, receipts, etc.) on the contrary increased, and this imbalance in the economy factually led to the “Black Tuesday” in 1929. The Great Depression was preceded by the rapid growth of the U.S. economy. From 1917 to 1927, the U.S. national income almost tripled. Conveyor production was invented, the stock market was rapidly developing, the number of speculative trading was growing, the real estate prices were going up. The increase in production of goods required the increase in the money supply, but the dollar was pegged to gold America was smashed and pulled into the depression by the stock market, one of the pillars of capitalism. President Herbert Hoover, a supporter of the laissez-faire principle (non-interference of the state in the economy) refused to use the tools of state power, and as a result the economic situation deteriorated. Hoover’s successor, Franklin Delano Roosevelt started the government intervention and guided the country to recovery. The conclusion seems obvious: capitalism cannot be trusted, and the state should play an active role in the economy to save us from inevitable decline.