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Author Topic: The Great Depression  (Read 7992 times)

sooyeah

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The Great Depression
« on: 21/09/2007 12:31:48 »
I was asking myself, What truly caused the Great Depression? Haven't got any further than asking, so I was wondering if anyone here knows?
I mean did one single event cause it? Or was it like the United States that caused it? I mean what lead up to it?


 

another_someone

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The Great Depression
« Reply #1 on: 21/09/2007 13:37:28 »
I was asking myself, What truly caused the Great Depression? Haven't got any further than asking, so I was wondering if anyone here knows?
I mean did one single event cause it? Or was it like the United States that caused it? I mean what lead up to it?

Personally, I suspect it was part of the readjustment after the first world war.

Clearly, there can be highlighted lots of individual short term changes that might have been the immediate trigger for the actual events, but the underlying systemic conditions that allowed it to happen are not something one can find in the immediate months before it happened.

Looking recently at some of what was written about the economic decisions made in the aftermath of WWII, it looks like many people in the 1940's believed that the after effect of WWI was to cause a boom in world economies, and this boom turned into a bubble, and the depression was caused by a collapse of that bubble (it seems more care was taken in the way the economies were managed after WWII to prevent a boom taking place).
 

Offline JimBob

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The Great Depression
« Reply #2 on: 28/09/2007 04:42:09 »
One of the contributing factors was the horrible condition of the economies of Germany and its allies. It was due largely to reparations paid to the victors. The US, French and British economies boomed at the expense of money taken from those who lost the war. Also, The British and French obtained control (protectorship) of the Arab countries, allowing them to exploit the oil reserves there. That was a huge deal in itself and did not end until after WW II.

I think there are other factors, of course, such as the world's stock markets allowing people to buy stock on credit. It was not just the US. We are beginning to see this trend again as loans and credit are extended to people who could normally not qualify for it. That is the reason for the lowering of interest rates here in the US recently and the resulting fall in the value of the dollar against other currency.   
 

another_someone

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The Great Depression
« Reply #3 on: 28/09/2007 19:23:39 »
Looking at the various Wikipedia articles on the Great Depression, although there are at least half a dozen different theories, one common factor to them all seems to be a loss of worldwide liquidity (which, as has been pointed out, is a situation we risk right now).

Although the British economy was buoyant before the depression, it lacked substance because of the massive sale of assets that had been undertaken to pay for the war.  This was made worse by sticking to the gold standard, which had the effect of overvaluing the British economy (but conversely, would have undervalued the American economy) - again, an analogy with the overvaluing of western economies, and undervaluing of the Chinese economies today.

The problem is that with the first signs of the depression came into view, the reaction was protectionism, which reduced international trade, which merely exasperated the lack of liquidity.

The stock market crash in 1929 was probably the trigger, but the crash itself was a short term issue, and quickly recovered; but the trouble is that it was enough to trigger the collapse of what were weakly underpinned economies.
 

The Naked Scientists Forum

The Great Depression
« Reply #3 on: 28/09/2007 19:23:39 »

 

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