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America's Great Depression: Governments
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The Great Depression was not the country’s first depression, though it proved to be the longest. The common thread woven through the several earlier debacles was disastrous manipulation of the money supply by government. For various reasons, government policies were adopted that ballooned the quantity of money and credit. A boom resulted, followed later by a painful day of reckoning. None of America’s depressions prior to 1929... lasted more than four years and most of them were over in two. The Great Depression lasted for a dozen years because the government compounded its monetary errors with a series of harmful interventions.
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The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their first full-scale treatment of this crucial subject. The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward. --This text refers to the Hardcover edition.
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"The Great Depression was a formative experience for our country and our culture. By reading Kit's stories, girls today will learn how the Depression affected not only government, businesses, and families, but even nine-year-old girls like Kit," says Julia Prohaska, brand director for American Girl(R). "Through Kit's trials and triumphs, girls will begin to understand this time period in a personal way. By comparing Kit's life to their lives today, girls can see that while much has changed, many of the experiences and emotions of girlhood are still the same."
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In 1929 the standard economic theory suggested that a calamity such as the Great Depression could not happen: the economy possessed equilibrating mechanisms that would quickly move it toward full employment. For example, high levels of unemployment should put downward pressure on wages, thereby encouraging firms to increase employment. Before the Great Depression, most economists urged governments to concentrate on maintaining a balanced budget. Since tax receipts inevitably fell during a downturn, governments often increased tax rates and reduced spending. By taking money out of the economy, such policies tended to accelerate the downturn, though the effect was likely small.
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Oct. 29, 2007 marks the 78th anniversary of “Black Tuesday,” often referred to as the start of the Great Depression. With that backdrop, treat yourself to Mackinac Center president Larry Reed’s essay “Great Myths of the Great Depression” for a succinct review of the government policies that helped lead to, and needlessly prolonged, that bleak time.
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Short signed government economic policies were another factor that led to the Great Depression. Politicians believed that business was the key to a successful country. Therefore, the government took no action against unwise investing.
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