Timeline of the Great Depression

From 1920 to 1945. I’ll post the highlights from 1930:

1930

* By February, the Federal Reserve has cut the prime interest rate from 6 to 4 percent. Expands the money supply with a major purchase of U.S. securities. However, for the next year and a half, the Fed will add very little money to the shrinking economy. (At no time will it actually pull money out of the system.) Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: “Liquidate labor, liquidate stocks, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people.” (More)

* The Smoot-Hawley Tariff passes on June 17. With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.4 percent per citizen. Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside. The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U.S., but a major one in Europe. (More)

* The first bank panic occurs later this year; a public run on banks results in a wave of bankruptcies. Bank failures and deposit losses are responsible for the contracting money supply.

* Supreme Court rules that the monopoly U.S. Steel does not violate anti-trust laws as long as competition exists, no matter how negligible.

* Democrats gain in Congressional elections, but still do not have a majority.

* The GNP falls 9.4 percent from the year before. The unemployment rate climbs from 3.2 to 8.7 percent.

2 Comments

  1. Reading about the Federal Reserve and how it works never interested me till Ron Paul brought it up in his talks.I always thought my tax dollars ran the USA government till he said the FED.reserve got it because the government had to pay the loans back+interest to the bankers that own and run the bank,which is not a part of our government.Why not just keep the money in the USA government hands and not pay interest?

  2. Deficit spending. If they spend, meaning they pay cash money to someone, when they don’t have it on hand, they have to borrow it from somewhere, right? That’s where the bankers come in.

    So not paying interest would mean either they’re stealing from the bankers, or they’re paying off the national debt. In the world we live in, that’s not really an option.

    Actually, in the world we live in, deficit spending by governments has preceded most every economic recovery in history. Usually that kind of deficit spending is in preparation or operation of war. Curious, eh?

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