Реферат: Facts Of The Great Depression Essay Research

Facts Of The Great Depression Essay, Research Paper

To my amazement the Great Depression serves as a natural debating point that “justifies”

or “refutes” various economic policies. The Great Depression and the New Deal are

complex topics that are open to many interpretations. The Great Depression was the

worst economic slump ever in U.S. history, and one which spread to virtually all of the

industrialized world.

Seeing the order in which events actually occurred dispels many myths about the

Great Depression. One of the greatest of these myths is that government intervention was

responsible for its onset. Truly massive intervention began only under the presidency of

Franklin Roosevelt in 1933, who was sworn in after the worst had already hit. Although

his New Deal did not cure it, all the leading economic indicators improved during his

tenure.

To understand the Great Depression, it is important to know the theories of John

Maynard Keynes. Keynes is known as the “father of modern economics” because he was

the first to accurately describe some of the causes and cures for recessions and

depressions.

In a normal economy, Keynes said, there is a circular flow of money. My

spending becomes part of your earnings, and your spending becomes part of my earnings.

For various reasons, however, this circular flow can falter. People start hoarding money

when times become tough; but times become tougher when everyone starts hoarding

money. This breakdown results in a recession.

To get the circular flow of money started again, Keynes suggested that the central

bank, the Federal Reserve System, should expand the money supply. This would put

more money in people’s hands (through the multiplier effect), inspire consumer

confidence, and compel them to start spending again.

A depression, Keynes believed, is an especially severe recession in which people

hoard money no matter how much the central bank tries to expand the money supply. In

that case, he suggested that government should do what the people were not: start

spending money. He called this “priming the pump” of the economy. I think that most

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