The Great Depression

Part of the (not followed) Lessons that I should be posting here is this economic topic about the Great Depression. A phenomenon that started more than 80 years ago, and is still showing it’s presence in the world today, specially in the United States of America.

Before heading to the Great Depression that happened years ago and the present coexisting Great Depression right now in the U.S, let’s define what this Great Depression is all about.

The Great Depression, which started to exist since 1930 said to be the outcome after the “Black Tuesday” event that occurred on the 29th of October 1929. The Great Depression origins from the United States of America, which then turned to be a globally economic downturn for almost all countries at that time.

In General a Economic Depression is a severe economic downfall or downturn of once country, lasting for a couple of years. The Americans can somehow be called lucky, for having not experienced Economic Depression since the globally known one, in 1930.

Some of the factors that lead to Economic Depression are:

  • Over Production matched with under consumption
  • Structural weakness in banking
  • Postwar deflationary pressures
  • and a lot more factors.

Of these factors, which appears to be the most striking one is the first listed. According to this view, wages decreased at a rate higher than productivity increases. Most of the benefit of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases. Say’s law no longer operated in this model (an idea picked up by Keynes).

Some of the key countries that have been affected by the Great Depression include:

  • Australia
  • Canada
  • Japan
  • France
  • Germany
  • Netherlands
  • United States of America
  • Soviet Union
  • United Kingdom

But it’s not only limited to these, as it has taken effect in the whole world.

  • Pingback: Global Depression or Great Depression Pictures | Pinoy Teens in Photos()

  • http://rimewire.wordpress.com rimewire

    buti n lng elyen ako

    hakhak

    d ku nrrmdman yan

    hakhak

    elyens porber

    XXXxx

  • Pingback: Free Economy Blogs» Blog Archive » - United States Economic Depression()

  • http://seasons.davaobloggers.com/ kikamz

    thanks for this lesson on the great depression..

  • John Petty

    Here is an article about the fed chairman during the time of the Great Depression and what he thought caused it. The same thing is happening again for the same reasons. Please read:

    In Review: America’s Most Egalitarian Banker
    Marriner S. Eccles, Beckoning Frontiers: Public and Personal Recollections. New York: Alfred A. Knopf, 1951.
    At the start of the Great Depression, Marriner Eccles hardly seemed someone who might lead a charge against the economic orthodoxies that justified grand hoards of private fortune. By the early 1930s, after all, the Utah-born Eccles had become the top banker in the Mountain West, the organizer of the first multibank holding company in the United States.
    But Eccles had also come to understand, after watching the great speculative bubbles of the 1920s pop into massive misery, that prosperity — to endure — needs to be shared. Eccles began speaking out on that theme, shortly after the Great Depression began, and soon caught the attention of the early New Dealers.
    In 1933, Eccles would become an assistant secretary of the treasury. A year later, Franklin Roosevelt would appoint him to the Federal Reserve Board. He would become Board chair in 1935 and remain in that central position for the next 13 years. No one individual, over those years, had more of an impact on economic policy in the United States.
    Looking back on those years, in his 1951 memoir Beckoning Frontiers, Eccles would do his best to explain the impact he set out to make. Mass production, he noted at the outset, demands mass consumption, but people can’t afford to consume if the wealth an economy generates is concentrating at the top.
    In the years leading up to the Great Depression, that concentrating was accelerating. A “giant suction pump,” charged Eccles, “had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth.”
    “In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands,” Eccles observed, “the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”
    Sound familiar? The decade of the 1920s that Eccles describes in his 1951 memoir comes across today as eerily familiar. Then as now, the U.S. economy was floating on a sea of debt.
    Then as now, inequality was hollowing out the nation. Eccles put the matter bluntly: “Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy.”
    How would Eccles have reacted to our current debt-ridden, war-torn economy? We can’t, of course, know for sure what Eccles would do. But we do know what he did. In 1942, during World War II, a high-powered team of New Deal officials that included Eccles proposed to President Roosevelt that “a ceiling of fifty thousand dollars after taxes should be placed on individual incomes.”
    In our current dollars, this $50,000 ceiling would equal about $700,000. What did FDR do with the Eccles proposal? He turned around and asked Congress to place a 100 percent tax on all individual income over $25,000.
    Congress would eventually set the nation’s top tax rate at 94 percent on all income over $200,000, and that top tax rate would hover around 90 percent for the next two decades, years that would see the greatest period of middle class prosperity in U.S. economic history.
    In 2005, the latest year with statistics available, America’s leading hedge fund managers and the rest of the nation’s top 400 income-earners faced a top tax rate of 35 percent. They actually paid, after loopholes, just 18.2 percent of their incomes in tax.
    Marriner Eccles would not approve.
    Stat of the Week
    In the two decades between 1986 and 2005, America’s top 1 percent of taxpayers saw their share of the nation’s income jump from 11.3 to 21.2 percent. Over those same years, the federal income taxes the top 1 percent paid dropped by an equally stunning margin, from 33.13 percent of total personal income in 1986 to 23.13 percent in 2005, the most current year with IRS stats available. Taxpayers needed to report at least $364,657 in 2005 to enter the top 1 percent.
    About Too Much
    Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org

    • http://www.kevinpaquet.com Kevin Paquet

      @john, thanks for sharing this article about the great depressionw with us here

  • http://yahoo raTed_18

    ,.,,.,.thanks for the info…
    ..
    ..
    ..
    ..
    .,.,(its my report for tomorrow!!!!)
    .
    .
    ..
    wish me luck