What do you think caused the GD?

[Craig234]

Please fix your post so it doesn't show me saying something you said.

I thought we were discussing causes of the GD, not FDR and the New Deal.

No, you don't get to comment on FDR and the new deal and then call a response off-topic.

Like I said, the New Deal "helped a little." It was just a short term fix, though.

Look what happened in '37-'38, the so called "Roosevelt Recession." FDR was under pressure to balance the budget and the economy was improving, so he cut funding to New Deal programs. Unemployment went through the roof, the stock market crashed - it was the beginning of the GD all over again.

Roosevelt reinstated them but the economy was not bouncing back quickly at all. These are the conditions Roosevelt would have left the office in 1940 if it were not for the war.


Short term though, sure, they helped a great deal. The Emergency Banking Act, FDIC, WPA, etc. at least stopped the bleeding and more importantly gave people some hope. And a lot of them are still around today, for better or worse.

Going from a major financial crash every 10 to 15 years, to no major financial crash for 50 years (until Reagan deregulation); and providing significant aid to the people is not 'just a little'.

That's how right-wing propagandists talk. They want to convince you the government - the thing that stands up for the people to the wealthy when it works - is bad. So they just twist the facts and go from there.

 

[DougoMan]

Going from a major financial crash every 10 to 15 years, to no major financial crash for 50 years (until Reagan deregulation); and providing significant aid to the people is not 'just a little'.

That's how right-wing propagandists talk. They want to convince you the government - the thing that stands up for the people to the wealthy when it works - is bad. So they just twist the facts and go from there.

At no point has anything I said applied outside of the timeframe of 1920-1940.

What I am arguing is that the New Deal did not end the GD. WWII did that. There is nothing particularly radical about that statement. It is widely agreed upon.


Did the New Deal lead to the prosperity the country experienced for the next 50 years? No freaking idea.

And really, me, right wing zealot? Come on.


edit:

What I do hate is this Roosevelt = God mentality among some people. Guy was a douche. Pretty damn good President, but definitely a douche.

 

[LegendKiller]

At no point has anything I said applied outside of the timeframe of 1920-1940.

What I am arguing is that the New Deal did not end the GD. WWII did that. There is nothing particularly radical about that statement. It is widely agreed upon.


Did the New Deal lead to the prosperity the country experienced for the next 50 years? No freaking idea.

And really, me, right wing zealot? Come on.


edit:

What I do hate is this Roosevelt = God mentality among some people. Guy was a douche. Pretty damn good President, but definitely a douche.

How was he a "douche"?

 

[DougoMan]

How was he a "douche"?

Well, look this is entirely my opinion of the man, not the politician. Really he was a great President.

But as a person... he could be vindictive, two sided, a liar, a cheater. Part of it was this neurotic need he had to please everybody. So anytime you met with him, he would always agree with you. Always promise to take you up on your suggestion, or support you... and almost always fall through.

He cheated on Eleanor (with her secretary Lucy Mercer), which devastated her, and promised never to see her (Lucy) again. Roosevelt started seeing her again anyway (in fact it was Lucy not Eleanor that was with him when he died).

What seems most disturbing though is that he just did not seem to form strong emotional connections to people. Like when his secretary Miss LeLand had a stroke, who was basically his wife for 20 years after Eleanor and him ended their romantic relationship after the affair, he rarely visited her. They spent 20 years together and he basically just decided to forget about her once she became ill. Eleanor saw her more often than he did.

I dunno.. Not a guy I would want for a friend.


Also kind of funny... total mommas boy. His mom ruled his life until she died. Even managed his finances. Ridiculous.

 

[Pr0d1gy]

9/11 caused the Greater Depression, although it was a delayed reaction people will look back on the toll 9/11 put on the travel industry and that industry's poor reaction to it that lead us down this path.


Oh you meant the original GD? My bad....

 

[FoBoT]

FDR prolonged it with his socialistic policies

 

[Atreus21]

From what I understand of it, the fault lies across a spectrum of culprits. One of them was simply that our economy was not diversified enough.

People who are trying to make political points in the present from an event that happened that long ago are really reaching.

 

[werepossum]

Those are not really the big ones. Protectionism and govt. intervention were not causes but rather responses to the GD.

<<---- GD expert (ok not really but I am a history student that has taken classes on the period and read several thousand pages about it)

In my reading the most commonly agreed upon causes I have found are:

1. Technology and sick industries. In the decade preceding the GD industrial output doubled without employing any new workers. Industries that traditionally employed large numbers of workers like coal were being replaced by more mechanized industries like oil that required fewer workers.

2. Farming crises. Again largely because of technology (large scale pesticide based agriculture as we know it today was just taking off), farm output doubled and resulted in overproduction and huge decrease in prices putting farmers out of work. Also the dust bowl at this time put even more farmers out of work. Remember a large percentage of people were still farmers back then.

3. Distribution of income. It was the most uneven in our nations history, which did not work for a consumer economy since people could not afford to buy all the new stuff being made. Nobody was buying houses and all the consumer goods that go along with those purchases.

4. Speculation/Margin buying. Contrary to what people think the Stock Market crash was more a symptom than a cause of the GD. However it definitely made a bad situation worse and unsound lending practices were mostly to blame. Also people were putting all their money into stocks instead of investing in growth industries that employed workers.

Also as one teacher I had put it, "shit happens." That might be as good an explanation as any.


What is agreed upon is that FDR and the New Deal did not fix the depression much at all. It helped a little but by 1938 things were not looking that good. If it were not for WWII FDR would probably be looked upon as a failure.

Several really good posts and I can't argue with anything you say, which shows the value of studying history. (I too have read several thousand pages but most of that was decades ago.) I suppose the things that most of us think of as causes of the Great Depression would be better debated as to whether or not they turned a recession into a depression, lessened the severity, lessened the duration, or did nothing. I am curious as to your opinion of Hoover's policies, which from what I remember have been judged as well-intentioned but largely without effect.

I'm also curious if you see any parallels between that time and our own. During the twenties workers were being displaced by automation; in our time they are being displaced by out-sourcing. The Dust Bowl caused a huge hit to one of our core industries; we are still heavily reliant (though admittedly not to the same degree) on agriculture and have suffered no such losses, but given the prevalence of genetically engineered monocultures certainly we face the same risk. Wealth is probably as unevenly distributed at the moment as it has been since World War 2 created the great blue collar boom. And the mortgage-driven securities failures (if not outright fraud) certainly parallels the trading in the 20s that left so many unable to meet margin calls when the market crashed. So what do you think is our risk of repeating the Great Depression within the next decade?

 

[ElFenix]

Your first point is pretty correct. There's no such thing as an "efficient market", even in the weak form. Efficient markets assume one basic premise...

the presence of information assumes it is assimilated and used logically by all market participants.


This single premise destroys EMH considering biases and emotions eliminate the ability of people to locally use the information.

This is also why Austrian economics fails. It doesn't take into account humanity.

As far as the Black-Scholes, it is but one method for valuing stock options. There are tons of models out there.

shhhh, don't let the economists know that they're really mass psychologists and not physicists.

 

[LegendKiller]

FDR prolonged it with his socialistic policies

That's a bunch of bullshit. There were some policies that stunk but overall they improved the situation.

 

[LegendKiller]

Well, look this is entirely my opinion of the man, not the politician. Really he was a great President.

But as a person... he could be vindictive, two sided, a liar, a cheater. Part of it was this neurotic need he had to please everybody. So anytime you met with him, he would always agree with you. Always promise to take you up on your suggestion, or support you... and almost always fall through.

He cheated on Eleanor (with her secretary Lucy Mercer), which devastated her, and promised never to see her (Lucy) again. Roosevelt started seeing her again anyway (in fact it was Lucy not Eleanor that was with him when he died).

What seems most disturbing though is that he just did not seem to form strong emotional connections to people. Like when his secretary Miss LeLand had a stroke, who was basically his wife for 20 years after Eleanor and him ended their romantic relationship after the affair, he rarely visited her. They spent 20 years together and he basically just decided to forget about her once she became ill. Eleanor saw her more often than he did.

I dunno.. Not a guy I would want for a friend.


Also kind of funny... total mommas boy. His mom ruled his life until she died. Even managed his finances. Ridiculous.

So you've just described most of the great men in history (vindictive, two sided, a liar, a cheater). In fact, you've described a huge % of men in history. Washington was no angel. Jefferson had problems reconciling slavery with his own slaves (not to mention fathering Sally's children) and died a deadbeat debtor living outside his means. Hamilton was guilty of many of your points. Most of our great generals were the same.

Part of FDR's ability to get things done is that he convinced people to do things without them knowing it. In fact, he never really agreed or disagreed with anything, nor committed to anything, he just guided people. There's absolutely nothing wrong with that. It was an effective way to work.

His an Eleanor's relationship was never that great. His mother *always* took #1 position in his life and he never really stepped up for ER. Sure, they never shared a bed afterwards, but they were never that strong before the affair. FDR also died with the artist, so what? Far be it from us to judge his personal life.

He also was in the middle of a war after LeHand had a stroke. He did spend time with her and did ensure her care. He basically worked himself to death over the war, everybody knew he was dying but he wouldn't stop. To villify him because he didn't take time to visit her more than somebody who wasn't President during the largest world war is simply ridiculous.

His mom managed the family money, it was her estate and she did what he wanted to with it. His own income couldn't support his expenses, thus, he did depend on her, by proxy, through the family estate. There's something wrong with this?

Seems to me that while you may be a history major (as was I, with a psych double) you lack the well-rounded thoughts, strictly interpreting history by your own rubric rather than placing them in context.

 

[LegendKiller]

1. Technology and sick industries. In the decade preceding the GD industrial output doubled without employing any new workers. Industries that traditionally employed large numbers of workers like coal were being replaced by more mechanized industries like oil that required fewer workers.


2. Farming crises. Again largely because of technology (large scale pesticide based agriculture as we know it today was just taking off), farm output doubled and resulted in overproduction and huge decrease in prices putting farmers out of work. Also the dust bowl at this time put even more farmers out of work. Remember a large percentage of people were still farmers back then.

3. Distribution of income. It was the most uneven in our nations history, which did not work for a consumer economy since people could not afford to buy all the new stuff being made. Nobody was buying houses and all the consumer goods that go along with those purchases.

Can't disagree with much above. However...

4. Speculation/Margin buying. Contrary to what people think the Stock Market crash was more a symptom than a cause of the GD. However it definitely made a bad situation worse and unsound lending practices were mostly to blame. Also people were putting all their money into stocks instead of investing in growth industries that employed workers.

The expansion of credit through margin purchasing and the resulting investing in any stock resulted in too much money flowing into the capital markets, too many companies outgrowing long-term demand, and the end-result was over-expansion of GDP. While the crash itself might have been a symptom, it was the underlying factors that resulted in the crash that were key.

What is agreed upon is that FDR and the New Deal did not fix the depression much at all. It helped a little but by 1938 things were not looking that good. If it were not for WWII FDR would probably be looked upon as a failure.

This is a bald-faced lie perpetuated by people who do not look at the statistics and the actual calculation of them.

It is a *fact* that unemployment was cut in half by 1937. It was a *fact* that the actual unemployment statistic did not take into account CCC/TVA and other works-projects. Thus, unemployment wasn't 25% (as original) or 12% (as reduced) but actually closer to 4-5% when the works projects were accounted for.

To blame 38 on FDR's policies is ridiculous. The rug was pulled out from underneath an improving economy because the conservative monetarists wanted to improve the dollar's strength. It is also a fact that almost every economy that exited the GD early was either an uber-strong gold country (France and China since it actually had a dual-asset current (silver and gold)), or one that spent massively despite deficits or a declining currency.

In fact, gold backed currencies, overall, exited the GD later. Strictly speaking, inflexible currencies and governments cannot respond effectively to an economic crisis.

 

[piasabird]

My first thought was what the heck is a GD?

I cant even remember that far back. However, today it seems like with the advent of online stock trading that there is a lot more information out there than there was around the time of the first WW. However, you might ask how our current predictament was caused in this era of instant information? Around the time of the great depression many people in the government believed they should do nothing and the market would correct itself. Maybe that is what really caused the great depression?

 

[DougoMan]

So you've just described most of the great men in history (vindictive, two sided, a liar, a cheater). In fact, you've described a huge &#37; of men in history. Washington was no angel. Jefferson had problems reconciling slavery with his own slaves (not to mention fathering Sally's children) and died a deadbeat debtor living outside his means. Hamilton was guilty of many of your points. Most of our great generals were the same.

Well look, it's subjective. We all have our own criteria for what constitutes a "great man." I just happen to think personal integrity should be a big part of it.

It's quite possible to be both a great leader and an honest man. Need an example?

Abraham Lincoln!

I mean, wow, there is a guy you just have to respect. A true role model. Did that guy even have any faults? Not that I am aware of.

I think part of my anger stems from a poll they took some time back that put FDR ahead of Lincoln as America's best president. Give me a break!

It is a *fact* that unemployment was cut in half by 1937. It was a *fact* that the actual unemployment statistic did not take into account CCC/TVA and other works-projects. Thus, unemployment wasn't 25% (as original) or 12% (as reduced) but actually closer to 4-5% when the works projects were accounted for.

Right, things were looking great in '37. And then the economy crashed, and things did not return to the '37 level until 1941 with the start of the war.

You do not think there is a connection between FDR cutting WPA funding in 1937 and the rise in unemployment that followed?

Seems like quite a coincidence. I mean the whole reason unemployment went down is because everyone was working for the government (WPA).

I'm also curious if you see any parallels between that time and our own. During the twenties workers were being displaced by automation; in our time they are being displaced by out-sourcing. The Dust Bowl caused a huge hit to one of our core industries; we are still heavily reliant (though admittedly not to the same degree) on agriculture and have suffered no such losses, but given the prevalence of genetically engineered monocultures certainly we face the same risk. Wealth is probably as unevenly distributed at the moment as it has been since World War 2 created the great blue collar boom. And the mortgage-driven securities failures (if not outright fraud) certainly parallels the trading in the 20s that left so many unable to meet margin calls when the market crashed. So what do you think is our risk of repeating the Great Depression within the next decade?

Well, they say history repeats itself... (better start hiding money under the mattress!)

 

[JEDIYoda]

http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm

What caused the Great Depression, the worst economic depression in US history? It was not just one factor, but instead a combination of domestic and worldwide conditions that led to the Great Depression. As such, there is no agreed upon list of all its causes. Here instead is a list of the top reasons that historians and economists have cited as causing the Great Depression.
The effects of the Great Depression was huge across the world. Not only did it lead to the New Deal in America but more significantly, it was a direct cause of the rise of extremism in Germany leading to World War II.

1. Stock Market Crash of 1929
Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.

2. Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans. This exacerbated the situation leading to less and less expenditures..
3. Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation..
4. American Economic Policy with Europe
As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation..
5. Drought Conditions
While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath.

 

[zephyrprime]

Well, look this is entirely my opinion of the man, not the politician. Really he was a great President.

But as a person... he could be vindictive, two sided, a liar, a cheater. Part of it was this neurotic need he had to please everybody. So anytime you met with him, he would always agree with you. Always promise to take you up on your suggestion, or support you... and almost always fall through.

He cheated on Eleanor (with her secretary Lucy Mercer), which devastated her, and promised never to see her (Lucy) again. Roosevelt started seeing her again anyway (in fact it was Lucy not Eleanor that was with him when he died).

What seems most disturbing though is that he just did not seem to form strong emotional connections to people. Like when his secretary Miss LeLand had a stroke, who was basically his wife for 20 years after Eleanor and him ended their romantic relationship after the affair, he rarely visited her. They spent 20 years together and he basically just decided to forget about her once she became ill. Eleanor saw her more often than he did.

I dunno.. Not a guy I would want for a friend.


Also kind of funny... total mommas boy. His mom ruled his life until she died. Even managed his finances. Ridiculous.

Sounds like a narcissist. A lot of narcissists enter politics.

 

[zephyrprime]

It was a *fact* that the actual unemployment statistic did not take into account CCC/TVA and other works-projects. Thus, unemployment wasn't 25% (as original) or 12% (as reduced) but actually closer to 4-5% when the works projects were accounted for.

Reference? I cannot find any information on this.

 

[commondreamer]

I would have to agree with Hypertiger that the Great Depression was put into motion at the treaty of Versailles after WWI.

ARTICLE 235 The Versailles Treaty June 28, 1919

In order to enable the Allied and Associated Powers to proceed at once to the restoration of their industrial and economic life, pending the full determination of their claims, Germany shall pay in such installments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Reparation Commission may fix, during 1919, 1920 and the first four months Of 1921 , the equivalent of 20,000,000,000 gold marks."

Germany however had no gold, it was broke

What to do then?

The British (Bank of England) basically told Germany to print marks to buy GOLD...From? The winning powers...

The Looting of Germany carry trade...Germany printed marks and then bought Gold then the amount of GOLD they owed dropped and the winning Powers still had GOLD and loads of marks...what to do with all those marks? send them home to roost buying raw materials and finished goods...

The marks flooded into the German commercial banking system allowing it to inflate the debt supply in Germany...The more GOLD Germany bought the more marks they had to print...Which caused the purchasing power to drop...It was quickly losing it's value...

ut outside of Germany all the currencies were quickly gaining value...Basically German exports were getting constantly cheaper and cheaper...A free give away of German raw material and finished products basically...

This fueled the Roaring 20's until the mark was losing value so fast that it basically caused prices inside Germany to hyperinflate until it was impossible to account...The looting of Germany carry trade collapsed in 1924 after about 14 months of Hyperinflation of prices or a hyperdeflation of the value of the mark ...

side note...

Winston Churchill was Chancellor of the Exchequer (Treasury) of the United Kingdom from November 6, 1924 - June 4, 1929...

The collapse of the carry trade caused a hyperdeflationary implosion of the banking/monetary system in Germany and the shock wave spread out into the Global system and reached the USA by late 1926 and visibly manifested with the market crash October 21 1929...Since real estate began caving in first and the sell off there flowed into the Stock markets in search of yield inflating them from 1927 to 1929 in a massive mania...


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