What caused the Great Depression? What ended it?

[Un biased]

and easy credit was one of the factors in the latest recession.
The safety nets you mention are under attack by the extremists, who seem to think that the real reason the depression ended was spending for WWII, and not the New Deal, FICA, SS, etc. What do you think of that?

World War 2 got us out of the depression since it heightened the demand for manufactured goods which gave people jobs , brought up stocks in certain places . I can say that The safety nets kept the recession from becoming another depression . Most of the SS and Fica was implemented after the great depression . ( please accept my apology for posting this late holidays can be a bit crazy)

 

[Dittohead not!]

World War 2 got us out of the depression since it heightened the demand for manufactured goods which gave people jobs , brought up stocks in certain places . I can say that The safety nets kept the recession from becoming another depression . Most of the SS and Fica was implemented after the great depression . ( please accept my apology for posting this late holidays can be a bit crazy)

yes, they can.

Now, as for WWII bringing us out of the depression, there is reason to believe that is so. However, war is about waste. You build airplanes, just to have them shot down, tanks to have them blown up, and so on. You send the most productive members of society off to foreign lands where their labor produces nothing for the homeland, other than protection from an enemy,that is.

How would it not have the same effect on the economy to simply build machines, put them on barges, and sink them into the ocean? How would it not have the same effect on the economy if the youth were to be conscripted into the army to stage endless parades and drills? It would put people to work and reduce unemployment, just as a war does, and without killing anyone.

Or, better yet, those young and productive members of society could be put to work on public service projects that don't produce a profit, yet need to be done.

 

[joG]

well, there's this :

View attachment 67157302

as for what ended it, the alphabet programs helped some, but it was really the war that ended it permanently.

I know that and similar charts and do not really think them very helpful. As an example take the deregulation thing. The quantity of regulation before the two bubbles was gigantic. If anything there was too much regulation in the sense that nobody really understands, what it means for a bank let alone the financial market. There is lots of regulation and a lot of it is just lousy.

Also the amount of assets held by the top decile is misleading as it is a natural phenomenon at the end of periods of wild economic expansion. Capital is the rare resource and its price naturally goes up pulling the owners of capital with it. Economies get out of whack and the misallocations having piled up in the mad rush collapse the economy under their weight. This was the case in 1929 and it was the case in 2001.

The consolidation phase is always lengthy and hurts a lot. But large amounts of capital are badly invested in booms and the bust is what happens, when the market notices.

 

[Un biased]

yes, they can.

Now, as for WWII bringing us out of the depression, there is reason to believe that is so. However, war is about waste. You build airplanes, just to have them shot down, tanks to have them blown up, and so on. You send the most productive members of society off to foreign lands where their labor produces nothing for the homeland, other than protection from an enemy,that is.

How would it not have the same effect on the economy to simply build machines, put them on barges, and sink them into the ocean? How would it not have the same effect on the economy if the youth were to be conscripted into the army to stage endless parades and drills? It would put people to work and reduce unemployment, just as a war does, and without killing anyone.

Or, better yet, those young and productive members of society could be put to work on public service projects that don't produce a profit, yet need to be done.

I know they can that's why I posted it . I think you confused my post for someone who is advocating for more war . World war 2 had gotten America out of the depression since the need for steel and coal had increased so formerly unemployed people would have a job ( and put females back into the work force ) . Farmers did not need to destroy their own crops since of terrible inflation prices on food because the army needed to be fed . The smoot tariff was lifted . The Depression ended because of the War since it created funds . Even before America officially were involved with the war we were sending food to the allies and steel which helped our economy so the new deal was even possible. The other parts of your post had nothing to do with my post since I had not typed anything but how the depression was ended by ww2 since it was and how the safety nets kept the recession from becoming a depression . ( since it was and is) As said early in my post you have confused my post for advocating more war . I agree with your post if its any consolation since ww1 created a false economy in the first place which ww2 fixed .

 

[Helix]

I know that and similar charts and do not really think them very helpful. As an example take the deregulation thing. The quantity of regulation before the two bubbles was gigantic. If anything there was too much regulation in the sense that nobody really understands, what it means for a bank let alone the financial market. There is lots of regulation and a lot of it is just lousy.

Also the amount of assets held by the top decile is misleading as it is a natural phenomenon at the end of periods of wild economic expansion. Capital is the rare resource and its price naturally goes up pulling the owners of capital with it. Economies get out of whack and the misallocations having piled up in the mad rush collapse the economy under their weight. This was the case in 1929 and it was the case in 2001.

The consolidation phase is always lengthy and hurts a lot. But large amounts of capital are badly invested in booms and the bust is what happens, when the market notices.

Here's my opinion.

When most of the money is in the hands of the middle class, they spend it. When most of the money is in the hands of the very rich, they invest it. This is a good thing. However, a lot of that investment is gambling, which creates bubbles, bank failures, and financial crises. This is why we see a correlation between income inequality and financial collapses. Our economy would be much more stable if it was a little less top heavy.

 

[joG]

Here's my opinion.

When most of the money is in the hands of the middle class, they spend it. When most of the money is in the hands of the very rich, they invest it. This is a good thing. However, a lot of that investment is gambling, which creates bubbles, bank failures, and financial crises. This is why we see a correlation between income inequality and financial collapses. Our economy would be much more stable if it was a little less top heavy.

Oh. I am sure that it was not as simple as I described. The spending/investing argument is totally correct and the speculative nature of investing is certainly part of the equation.

 

[Dittohead not!]

I know they can that's why I posted it . I think you confused my post for someone who is advocating for more war . World war 2 had gotten America out of the depression since the need for steel and coal had increased so formerly unemployed people would have a job ( and put females back into the work force ) . Farmers did not need to destroy their own crops since of terrible inflation prices on food because the army needed to be fed . The smoot tariff was lifted . The Depression ended because of the War since it created funds . Even before America officially were involved with the war we were sending food to the allies and steel which helped our economy so the new deal was even possible. The other parts of your post had nothing to do with my post since I had not typed anything but how the depression was ended by ww2 since it was and how the safety nets kept the recession from becoming a depression . ( since it was and is) As said early in my post you have confused my post for advocating more war . I agree with your post if its any consolation since ww1 created a false economy in the first place which ww2 fixed .

I actually didn't think you were advocating for more war, but was just addressing how war could bring us out of a depression.

I think it's interesting how wasting resources actually can improve the economy by putting money into people's pockets and giving them something to do, even if that something is being sent off to war.

Surely, there must be a better way.

 

[finebead]

What caused the great depression, fraud and leverage. Fraud was rampant in the stock market, as was speculation by its players. Banks were under-regulated and over-leveraged. The responses by the govt. were appropriate and served the nation well for 70 years. The Securities and Exchange Commission was created and companies financial filings had to be submitted regularly and follow Generally Accepted Accounting Principles (GAAP). This was a huge advance bringing credibility to companies books, until Enron and others grossly ignored the GAAP rules in the late 90's which led to another bubble that burst in 2000.

Banks were over-leveraged, they had not kept enough reserves to meet depositor redemptions, which caused the banks to fail. Once the down-spiral started, real estate that their loans supported could not be sold at a price to retire the mortgage. The whole system got over leveraged.

Keynesian spending stopped the meltdown. Time allowed the system to recover slowly, like we're doing now. WW II spending completed the recovery.

 

[Lord Tammerlain]

As for the cause I would add the dust bowl as being an issue.

For coming out of it

Demand for military spending during ww2 put people to work, supply restrictions on consumer goods increased savings. Which after the war funded increased consumer spending.
The increased demand caused company's to seek to fill it, expanding and hiring people. Which caused a further increase in demand.

Today everyone but company's are in debt so demand is low., and expansion is minimal.

 

[Dittohead not!]

As for the cause I would add the dust bowl as being an issue.

For coming out of it

Demand for military spending during ww2 put people to work, supply restrictions on consumer goods increased savings. Which after the war funded increased consumer spending.
The increased demand caused company's to seek to fill it, expanding and hiring people. Which caused a further increase in demand.

Today everyone but company's are in debt so demand is low., and expansion is minimal.

And the way to increase demand is to put more money into the hands of the consumers, which both creates and requires good jobs. It's a Catch 22 sort of situation, isn't it?

 

[sawyerloggingon]

What started the great depression is complex and multifaceted but what ended it is an easy answer, WW2.

 

[Perotista]

What started the great depression is complex and multifaceted but what ended it is an easy answer, WW2.

I agree, about all I know about how the great depression starting was the stock market crash. So I'll leave it at that. I do agree WWII was what ended it.

 

[RogueWarrior]

What started the great depression is complex and multifaceted but what ended it is an easy answer, WW2.

The Depression ended before 1941.

Angry Bear » The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 1
Angry Bear » The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 2

So there it is. After two posts, I conclude:

1, the Roaring 20s prior to the start of the Great Depression were a period of deregulation, many tax cuts, and many recessions with very short lived recoveries. (sounds familiar..... The culmination of the Roaring 20s was a great economic disaster, perhaps the worst in American history. None of this applies to the New Deal Era prior to the start of World War 2.

2. Over the length of the Roaring 20s “recovery” and the New Deal recovery, growth was quite a bit faster during the New Deal years.

3. Woods writes carefully and precisely enough that it is hard to conclude that he does not realize 1 and 2.

4. Knowing what Woods appears to know, and knowing that economic policy has tremendous consequences on people’s lives, Woods is nevertheless willing to promote policies that did much more poorly than he implies and to attack policies that did much better than those he promotes

5. Glen Beck is either in on the con or he’s being had.

added text in red is mine


It ended because the marginal tax rate was returned to sustainable levels. Now compare them to today and what the economy is doing...
Do we really need to have another Depression before people wake up?

 

[mikeafone]

I'm not sure, but several cons are blaming Obama ...

 

[sawyerloggingon]

The Depression ended before 1941.

Angry Bear » The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 1
Angry Bear » The 1920s Depression: Glenn Beck, Thomas Woods, and "Benefits" of Cutting Taxes to Combat a Recession, Part 2

View attachment 67157461



added text in red is mine


It ended because the marginal tax rate was returned to sustainable levels. Now compare them to today and what the economy is doing...
Do we really need to have another Depression before people wake up?

Interesting links but it is 90% opinion.

 

[Amanda1858]

The subject of this thread came up in another one, where it doesn't really belong. This is my attempt to open the discussion in where it belongs.

So, what were the causes of the Great Depression? Were they similar to the recession we are (or are not, according to your perspective) coming out of currently? what ended it? Was the New Deal a positive or negative? Was it the war that really ended it? If so, does a healthy economy depend on being at war? Is war peace, as Orwell said?

Anyone want to go back to the early 1930s?

I can't answer most of your questions, Ditto. I do beleive the New Deal was a good thing though. It helped lots of people.

 

[RogueWarrior]

Interesting links but it is 90% opinion.

true but it gets you thinking doesn't it?

if the graph is true, every recovery (white areas) started prior to the tax cuts
every recession starts after a tax cut.

 

[danielpalos]

Capitalism looking for profit and socialism bailing out capitalism, afterward.

 

[Amanda1858]

The creation of the FDIC was good, as were a few other things...but the economy was slowed by the suspension of the gold standard, and way too much government spending went on in the name of Keynes - the great destroyer of long-term economies.

FDR just threw money at inefficient people and things, believing that simply pumping government spending alone can get you out of a funk. It can on a really limited level, and only temporary.

If the New Deal was...oh, maybe 3-5 years long or so, I could see it being a good thing.

Social Security is garbage, and I'll tell you why. It's a security blanket for people of a certain age. Now, if you reach age 65, you get assistance in what you paid in, which still holds today. One problem - in 1933, the average American lived to be...62. That means, more than likely, you were never designed to collect, and only did if you essentially "cheated death". Today, the average person lives to be...78. That means that a much, much higher percentage will be dipping into a fund that was designed to pay very little. Upon implementation of the New Deal, the pay-in to pay-out ratio was 16:1. Today? Less than 4:1. You wonder why Social Security is going broke? There you go.

FDR was, without doubt, the worst president in American history. Obama couldn't hold a candle to him.

How would you fix the Social Security program? Please don't say with the stock market. The stock market is not the place for money people can't afford to lose.

 

[Gipper]

How would you fix the Social Security program? Please don't say with the stock market. The stock market is not the place for money people can't afford to lose.

Raising the minimum collection age to 75.

 

[Amanda1858]

Raising the minimum collection age to 75.

OK. So you want to decrease the number of years a person would recieve benefits. You know many of us old geezers would be lucky to see 75, and how long would we live afterwards?

 

[ttwtt78640]

Raising the minimum collection age to 75.

That looks good on paper, but has some serious flaws. Making folks stay in the workforce for an extra decade adds to unemployment (more seeking work but no more jobs), which is not the world's best plan right now. Raising that full SS benefit age also means that many, many more folks will reach disability prior to that age, meaning that they still draw their SS but at a higher benefit rate than normal retirement. That may be partly offset by more dying before collecting SS, but that still means paying survivor benefits for their spouse.

The basic problem with SS is too few workers per retiree for the current "contribution" scheme/rate. Rather than try to reduce the number of recipients, it may work better to increase the "contributions" by lifting the cap, applying it to all income and, as a last resort, increasing the "contribution" percentage.

 

[Gipper]

OK. So you want to decrease the number of years a person would recieve benefits. You know many of us old geezers would be lucky to see 75, and how long would we live afterwards?

Social Security is garbage, and I'll tell you why. It's a security blanket for people of a certain age. Now, if you reach age 65, you get assistance in what you paid in, which still holds today. One problem - in 1933, the average American lived to be...62. That means, more than likely, you were never designed to collect, and only did if you essentially "cheated death". Today, the average person lives to be...78. That means that a much, much higher percentage will be dipping into a fund that was designed to pay very little. Upon implementation of the New Deal, the pay-in to pay-out ratio was 16:1. Today? Less than 4:1. You wonder why Social Security is going broke? There you go.

Are you morally superior to people in the 30s now?

If you want, I can start tossing around that long E word. You know it; say it with me. Ent...enti...

 

[Gipper]

That looks good on paper, but has some serious flaws. Making folks stay in the workforce for an extra decade adds to unemployment (more seeking work but no more jobs), which is not the world's best plan right now. Raising that full SS benefit age also means that many, many more folks will reach disability prior to that age, meaning that they still draw their SS but at a higher benefit rate than normal retirement. That may be partly offset by more dying before collecting SS, but that still means paying survivor benefits for their spouse.

The basic problem with SS is too few workers per retiree for the current "contribution" scheme/rate. Rather than try to reduce the number of recipients, it may work better to increase the "contributions" by lifting the cap, applying it to all income and, as a last resort, increasing the "contribution" percentage.

There's really no perfect solution to the problem, unless you want a geriatric flavor of Soylent Green. I would say that an elderly working populace would also increase demand for other services that could create jobs - I won't go into a list of what they would be, and I don't think it'd perfectly offset the reduced employment of people our age, but it may help.

 

[Dittohead not!]

There's really no perfect solution to the problem, unless you want a geriatric flavor of Soylent Green. I would say that an elderly working populace would also increase demand for other services that could create jobs - I won't go into a list of what they would be, and I don't think it'd perfectly offset the reduced employment of people our age, but it may help.

the problems are (1) there aren't enough jobs to go around now, and (2) employers are reluctant to hire anyone over 55, let alone 70.