the causes of the Great Depression?

[bushbush]

well, the Great Depression is one of the most horrible things ever happened to America.

what caused it though?

[Vladimir Lenin]

I'll tell you exactly what caused it:

the key cause of the Depression was the expansion of the money supply in the 1920s that lead to an unsustainable credit driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.

In fact, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929 [12] predicted the economic downturn, stating that "the boom will collapse within the next few months."

Ludwig von Mises also expected this financial catastrophe, and is quoted as stating "A great crash is coming, and I don't want my name in any way connected with it." [13] when he turned down an important job at the Kreditanstalt Bank in early 1929.

http://en.wikipedia.org/wiki/Great_D...l_explanations

[bushbush]

credit to Daovonnaex:

Prior to the existence of central banks, this led to wild boom-bust cycles in the short term with long-term price stability. If you look at price graphs from the 19th century, you'll see things like prices going up 20% one year and down 25% the next. Over the long term prices consistently dropped (as the economy kept growing but the amount of money was limited by the amount of gold).

In 1862 the National Banking System was created, which limited loans banks could make, required reserves of US Treasury bonds as well as gold, and a number of other things. This reduced year on year price changes somewhat, although panics still happened. In 1913 the Federal Reserve was created to monopolize the nation's money supply and create further price stability. Not surprisingly, it instead permanently increased it every year, so that since 1913 prices have always been rising. This allowed monetary expansion in the 1920s to continue for a long time and at a very high rate.

So, bankers tend to loan out money from investments. The investments then rise in value due to increased demand. The rising asset prices allow people to borrow money (which is created out of thin air) against value of the assets and spend it more...fueling an economic boom.

These rises in value don't actually represent more production though, and as valuations become more and more divorced from the real economy eventually the whole thing becomes a shaky house of cards and has to collapse. Selling starts, values fall, and soon a panic ensues. As the values of collateral fall and people lose their jobs, tons of people and business are unable to repay their debts. This results in lots of money being wiped out of existence, which futher makes it harder to repay debts since money is worth more. Eventually all bad debts get wiped out and the economy starts growing again.

This process is normally fairly quick--most panics lasted a few months to a year, then the economy always recovered strongly. What made the Great Depression so different is that Hoover intervened in this bad debt elimination process. This aggravated the whole thing and caused a long, agonizing, and much deeper decline. FDR then tried to revive the economy through direct interventions, but his interventions were poorly thought out and implemented. Eventually massive spending on weapons during World War 2 revived the economy.

[Kiljan Arslan]

You do know that the Austrian school is basicly a bunch of libertian Idealogues right?

FDR's however were not a disater like some here like to claim.

[Vladimir Lenin]

You do know that the Austrian school is basicly a bunch of libertian Idealogues right?

Your're wrong.

They are a group of Libertarian leaning, free market supporters.

Kind of like how you're a leftist leaning, collectivist market supporter.

[bushbush]

Your're wrong.

They are a group of Libertarian leaning, free market supporters.

Kind of like how you're a leftist leaning, collectivist market supporter.

but there are other theories too.

like this one:

Recent work from a neoclassical perspective focuses on the decline in productivity which caused the initial decline in output and a prolonged recovery due to government policies. These studies, many of which are collected in Kehoe and Prescott 2007[13], decompose the economic decline into a decline in the labor supply, capital stock, and the productivity with which these inputs are used. The countries studied all suffered initially from dramatic drops in productivity, but the recovery in output was much slower than the recovery in productivity. Harold Cole and Lee Ohanian argue that in America the cartelization of industry suppressed the labor supply, dampening the recovery and prolonging the depression. Studies of France, Germany, Italy, and the UK show similar patterns, modified by country-specific policies. Together, this line of research rejects simple explanations that imply a decline in the capital stock or that imply no decline in hours worked.

[Daovonnaex]

You do know that the Austrian school is basicly a bunch of libertian Idealogues right?

Hayek was not a libertarian despite attempts by libertarians to claim him. He rejected the label and even supported some welfare schemes.

FDR's however were not a disater like some here like to claim.

Look, just look up the National Industrial Recovery Act. FDR was a fine orator and a brilliant politician. His actual policies left much to be desired. To his credit he at least didn't raise taxes like Hoover did. And if you're just opposed to seeing this truth because libertarians are telling it to you, look at it this way: one can be opposed to failed collectivist policies without opposing collectivism itself. There are many historical incidences of state direction that were successful. The New Deal is not one of them. Nazi Germany, the USSR from 1929 to the late 1950s, France during the postwar era, the East Asian Tigers, Japan, Spain and Portugal under Franco and Salazar, and China since 1949 are all examples of successful state directed economic development (yes, I'm aware of the horrible human consequences and many terrible blunders made by Stalin and Mao, thanks).

[Kiljan Arslan]

Galt
http://blog.mises.org//blog/

They are preety clear that they are Libertarians (although not adverse to being chummy with racists.)

[Steel of Fury]

Could have been a ploy by the U.S. Govt. to make Americans more dependent on them. Which is exactly what happened.

[Sebdeas]

Could have been a ploy by the U.S. Govt. to make Americans more dependent on them. Which is exactly what happened.

Yes every government loves flushing their own economy down the toilet
Bloody conspiracy theorists.

[Каие]

Heres me thinking it was the protectionist policies.

[Daovonnaex]

Heres me thinking it was the protectionist policies.

Oversimplification. The US was ALREADY protectionist, as it basically had been without interruption since 1860. The Smoot-Hawley Tariff did, however, result in retaliation and in a subsequent decline in export markets. This wasn't the cause, however, but it did make a bad situation worse.

[Каие]

Oversimplification. The US was ALREADY protectionist, as it basically had been without interruption since 1860. The Smoot-Hawley Tariff did, however, result in retaliation and in a subsequent decline in export markets. This wasn't the cause, however, but it did make a bad situation worse.

Plus other countries followed suite with Protectionism and bang, Adolf is born.

[Daovonnaex]

Plus other countries followed suite with Protectionism and bang, Adolf is born.

Indeed. Protectionism was a leading motivator for both world wars. National Socialist Germany's drive for economic autarky required war so that Germany could secure the economic resources necessary for self-sufficiency.

[removeduser_426582376423734]

Indeed. Protectionism was a leading motivator for both world wars. National Socialist Germany's drive for economic autarky required war so that Germany could secure the economic resources necessary for self-sufficiency.

What the hell are you talking about? They didn't require the resources, they wanted them. They had enough to build up a massive army, didn't they?

[Каие]

Indeed. Protectionism was a leading motivator for both world wars. National Socialist Germany's drive for economic autarky required war so that Germany could secure the economic resources necessary for self-sufficiency.

Autarky didn;t require war, it needed war to test if it was enough but it didnt require war to be pulled of.

[removeduser_426582376423734]

But surely the fact that it was militarizing to such an extent pointed to its ability to be self-dependant if it wanted, but didn't want to do such a thing.

[Richard]

What? You mean it wasn't "The Jew"? Damn you, Hitler, you lied to me!