Ask Mike: What Caused the Great Depression?

[rational thinker]

What do you guys make of this guy's analysis?

Hey Guys,

The financial mess on Wall Street is all anybody seems to be talking about these days. Some are even wondering if we could be entering another “Great Depression.” I did a little research into the causes of the Great Depression to see if the circumstances are similar.

I always assumed the stock market crash of 1929 directly led to the Great Depression. But, as it turns out, that’s not necessarily so. An article from about.com lists the top five causes of the Depression, and while “Black Tuesday” is on the list, it wasn’t the only factor that triggered the meltdown. There was “a combination of domestic and worldwide conditions” including massive bank failures, reduced consumer spending, an ill-advised economic policy, and a horrible draught that caused many farms to go under. It was truly the perfect storm.

A blog explains that before the Great Depression, the stock market was artificially inflated due to massive speculation. Eventually, the market fell apart, and that event, combined with the unequal distribution of wealth among Americans, had a huge part in starting the Depression. During the 1920s, wealthy Americans whose income was among the top 1%, saw their disposable income rise 75%. Meanwhile, the per capita rise was only 9%. Not exactly a level playing field and certainly not a sustainable figure.

Times have, of course, changed. In the 1920s, there was far less government regulation. The stock market was much more a “wild west.” Everybody was playing, but there weren’t very many rules. A Yahoo! News article explains there are significant differences between the Depression and the economic crisis of today. During the Depression, unemployment was around 25%. Today, it’s around 6%. Economists agree that things could get worse (they always can), but something on par with the misery of the 1930s is unlikely.

What do you guys think about the events of the past few weeks? Have they changed the way you invest? Are you more cautious or more aggressive now that prices have dropped? Please leave a comment below.

Thanks for reading,

Mike

 

[Paulitician]

Not much. He doesn't really go into root causes or theory, but some of things might have contributed. I mostly just agree that there was "ill-advised economic policy."

 

[Dr.3D]

A blog explains that before the Great Depression, the stock market was artificially inflated due to massive speculation.

Doesn't the bank speculate when it makes a loan to somebody?
They speculate that the person will pay off the loan and they will collect the interest from that load. It seems the banks have made some bad speculations and this is what is causing the problem.

 

[Truth Warrior]

Bernanke: Federal Reserve caused Great Depression
Fed chief says, 'We did it. … very sorry, won't do it again'
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=59405

 

[Otter Mii-kun]

which is worse, 1930s or Zimbabwe?

Economists agree that things could get worse (they always can), but something on par with the misery of the 1930s is unlikely.

Fed chief says, 'We did it. … very sorry, won't do it again'

Apparently they think forcing us to suffer from the effects of hyperinflation will be better than allowing any deflationary depression.
If anything, once the hyperinflationary wave is made permanent (and it probably will), this crisis will be FAR WORSE than the 1930s.

Establishment politicians and the mainstream media tell us about how we need to avoid another Great Depression, yet are fanning the flames for another one-and it won't be deflationary-it'll be one of hyperinflation-and last much longer-if not permanently!

If Congress REALLY wanted to solve this crisis, they'd stop what they're doing, order the SEC to revoke the short-selling ban, order the FED to call back the entire $85 billion loan made to AIG, force AIG to declare bankruptcy and write-off their entire loss, revoke the FED's entire stake in AIG (since when does the Federal Reserve have any authority to hold securities stakes in insurance companies let alone bail them out?) and finally, pass H.R. 2755.

 

[noxagol]

The reason there was disparity in income and the rich had all that disposable money was because of the Fed pumping it in. This easy money caused the malinvestments which caused the stock market to over inflate. When it crashed, it crashed hard.

Also, the fractional reserve banking system had a big hand in it too.

 

[ItsTime]

Bernanke: Federal Reserve caused Great Depression
Fed chief says, 'We did it. … very sorry, won't do it again'
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=59405

how reliable is the world net daily? Ive been using the speech that big ben gave where he admitted it. This is a pretty handy link as well if they have any credibility.