Essay about America's Great Depression

1656 Words Sep 29th, 1999 7 Pages
The Great Depression is probably one of the most misunderstood events in American history. It is routinely cited, as proof that unregulated capitalism is not the best in the world, and that only a massive welfare state, huge amounts of economic regulation, and other Interventions can save capitalism from itself. Among the many myths surrounding the Great Depression are that Herbert Hoover was a laissez faire president and that FDR brought us out of the depression. What caused the Great Depression? To get a handle on that, it's necessary to look at previous depressions and compare. The Great Depression was by no means the first depression this country ever had, but it was clearly the worst. What made it different than the rest? At the time …show more content…
There are several explanations. The current Keynesian models rely on what is referred to as "sticky wages" (or "sticky prices") to explain why the cycles occurs. Under these models, wages or prices fail to reach their market clearing level. The Austrian School explanation is that all business cycles are due to government intervention in the economy. In particular, government efforts to manipulate the interest rate causes a boom and bust cycle because people over-invest ("mailnvestment") when interest rates are low and when interest rates are Raised to stave off the inevitable inflation, a bust is caused due to the mismatching of consumer and business goods. There are six depressions in American history that is thought to be the worst since detailed records of economic data started To be kept (around 1867), 1873-79, 1893-97 (actually two contractions separated by an incomplete expansion), 1907-08, 1920-21, 1929-33, and 1937-38. Although depressions vary on length and severity, the similarities are so profound that Nobel Laureate Robert Lucas has stated; "business cycles are all alike." Since it's been about 60 years since we've had a depression, One might think that the economy is being managed better than it used to be. It's not clear why the economy is being managed better. The Federal Reserve Board was created in 1913 and yet half of the worst depressions happened after its creation. A Better

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