Great Depression and its causes

January 7, 2009
By Michael Grimland, Columbus, MT

Without a doubt, the management of Americas resources was a leading cause of the Great Depression, however the depression itself can be viewed as a necessary evil, and will happen whenever there is a great surplus. Modern day depressions are just a blip on the radar, hardly even noticeable in the long run. On Black Tuesday the stock market lost 183 points, in two months. Now days, the market looses and gains 400 points without people noticing. What made the Great Depression "Great" was the length of time were were at the low, almost ten years. That being said the management of the business cycle had and still has, much to do with progression and recession. Good economic activity will undoubtedly expand the economy, this leads to more goods being purchased, and in time a rise in prices as well as a decrease in unemployment. Now this cant be good forever, eventually a surplus in goods arises because the new workers are putting out to much product for the consumer to handle. So in theory, a surplus causes a reduction in goods produced. This is the start of a classic recession. In a recession, unemployment levels start to rise, and because there is less money to buy goods, prices fall. When prices fall, there is a cut revenue stream and businesses will fold (much like the Chicago Tribune on Monday). At a certain point, the recession will end and the economy will start rebuilding. At the point when it starts rebuilding, a depression is declared. This depression period in the late 20's and throughout the 30's was called the Great Depression. First on the list of New Deal Programs started by President Roosevelt was the NIRA, or national Industrial Recovery Act, this act let the government regulate private businesses without violating anti-trust laws. The act set limits on production and prices as well as minimum wage, true to the check and balance system, this was regulated via the NRA or National Recovery Administration. The AAA (Agriculture adjustment Administration) and later the CRP (Crop rotation program) regulated the production of crops, the government would lease land and later pay farmers not to farm to prevent surpluses. In the FDIC (Federal deposit insurance corporation) every depositor is insured up to $5,000. TheFederal Reserve Act in 1935 changed our monetary system from the gold standard to fiat money. The Tennessee Valley Authority (TVA) built and regulated Dams for electricity.
The Federal Securities Act (FSA) regulated the way companies could issue stock.
These programs virtually guarrenteed the American Public that a depression of "Great Depression" standards would never again happen in the United States. With government intervention now a standard feature in the metaphorical american muscle car, and more government bailouts on the horizen, its possible to make the argument that American capitalism as we have known it no longer exists.

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