Why was the depression so deep & last so long

The Depresseion & why it lasted so long

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  • Created by: Dracupine
  • Created on: 15-05-13 08:06
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  • Why was the depression so deep & last so long
    • Nature of American business
      • aldistribution of wealth
      • Didn't take over other countries & should have to lesson depression
      • Over production (especially farmers)
        • "The capacity to produce out ran the capacity to consume" Joshua Freeman
      • 1/3 of banks part of Federal Reserve Board & therefore used 'On the marjin' an unhealthy practice
    • Extent of the Depression
      • 1929- alone 659 banks failed
        • $200mill of deposits lost
      • GNP down
        • 1929- $103 billion
        • 1933- $55 billion
      • Unemployment
        • 1929- 3%
        • 1933- 25%
      • Everyone suffered
        • North, East, West & South
        • As whole of US suffered = lo Depression
        • Agricultural cities...
        • New & old businesses
    • Monetarist Theory
      • reserve banks limited the amount of $ in cirulation
      • People had less to spend & tried to save, meaning less bought= less in circulation
      • Federal Gov. did nothing to regulate run away bill markets through Federal Reserve Banks
        • As Federal Reserve Banks lacked regulatory powers such as control of credit. Do Not Use 3  Powers Enough
          • Moral Relationship
          • Raising interest rates
          • Sale of Gov. securities
    • Insufficient Gov. Intervention
      • Should have increased tax on rich to equal income= increase revenue  to increase employment
      • Did freeze wages for a while & gave food stamps to 14,000 unemployed
      • (Rugged Individualism) Volantary ism
        • Effort instead of Gov. hoped to work. BUT Depression too severe.  Businesses  needed to dock wages & employees
      • Hoover should have lowered taxes
        • Keynes
          • 'Deficit Financing'
        • Introduced work schemes
      • David. H. Kennedy
        • Argued US should have abandoned Gold & lent $ to  US (Hoover should have)
      • Only 13 banks were under jurisdiction of the Federal Reserve Banks
    • Foreign Economic Crisis
      • WW1 & Treaty of Versailles resulted in severe problems for Europe
      • hoover believe this to be the prime cause
      • England abandoned Gold. Bad for US
      • US did not devalue dollar & should have
      • Many countries raised tariff thus reducing US external trade
      • Much of Europe loaned dollar off of US stock market. Collapse meant US wanted $ back worsening situation effecting US & Europe.
    • Hoover
      • The Veterans bonus march Hoover's greatest blunder
        • Anacostia flats destroyed as 3,000/15 thousand refused to leave
      • Worked long hours & docked 20% off pay fr US, but not enough
      • Lack of purchasing power strifled economy & led to Depression
      • Believed that Europe's having no purchasing powers was reason for US Depression


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