Causes of the Great Depression
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- čas přidán 27. 05. 2024
- You will learn the causes of the Great Depression as explained by two leading economic theories.
My lecture notes are found here: political-economy.com/causes-...
#greatdepression
You will come out with one primary cause of the Great Depression. It is clearly explained with cutting-edge macroeconomic theory by a college Professor who specializes in macroeconomic theory as well as the history of economic thought.
Ask questions if you need to prepare for an exam in the comments below.
The Keynesian Economics is a cosmetic surgeon who wants to operate forever on your face to make you look youthful;
the Austrian Economics is a man with common sense who wants to look healthy by exercising and eating balanced meals.
And, I was a trained Keynesian economist!!
I hope the more people and academics realize that 'we are not all Keynesians now'. Keynes only took one course in Economics and this is the paradigm which economists operate on. However, objective truth is not found in the majority but rather in the evidence and in logic.
@@EconLessons . Yeah, if oligarchs can't get you to spend more than you earn and force you to borrow, they fire everybody. Logic
Money flows up. Logic!
@@timtebone1843 Yes, and the best defense against that is no credit. Spend only what you have. Live with less. Monthly expenses 2k. Almost any job can fulfill that. Then while you are doing that work on plan B and be an entrepreneur on the side, wether it is CZcams or online sales or writing or blogging or lawncare or pool cleaning, you always have to think of plan B, while you have a day job.
@@EconLessons . I deeply appreciate your response. You didn't even try to sell me anything! Lol.
I'd like to figure out if you're would-be left or I'm would-be right. We're both pro capitalism, anti debt. You call it credit, 100% of the time. Often the functional word is debt, but all academic folk still say credit.
The video's conclusion says the interest rate being high vs low is relative to the pre existing rate due to access of credit. Thats incorrect. Its relative to the amount of pre existing debt in the economy.
Left views the cause as flooding the economy with fake money. The greater fools think money is free and they tank the economy. FDR knew this. FDR did not go broke when the market crashed. The central bank was privatized in 1913, US. It existed, but under direct control of the government. Civil war was just before this. Control of currency was control of the flag.
During the rapid expansion of the 20s, there was mass over farming in the Midwest. Like the notorious tulip crash in europe, without of gov oversight or farmer co-op boards, they tanked the entire industry! A price forecast leads to competitors planting the highest value crops. They did that, the value dropped to below shipping costs. FDR formed the farmer union and paid people to destroy harvested crops to stabilize the industry. People starved cause the combination of debt expansion and raw free market approaches to profit. Once again the tax payer fixed it.
Both of these "economic theories" are truly ideological word play. A creditor is just an accelerationist libertarian.
A libertarian is either an honest feudalist or a lied to left person. The creditor proves we need ceilings, regulations, money out of politics, deconsolidation in media. They do that by accelerating your natural process.
Money flows up. Work made us rich. Its not marxist, its the most obvious fact on earth... To believe otherwise is a support of consolidated authority, cause your just saying the king did the work by letting you work...
The equilibrium is wrong in terms of disparities. Competition is dead. Innovation is subsidized. Tax the rich. Tax their recipient kids more.
@@timtebone1843 Very detailed reply, and thank you. The Federal Reserve's control of money is one of my favorite topics. If there was not Fed the world would be a better place in terms of equality, I think. Many economists have noted the redistribution effect of monetary policy. However, the Stockholm school economist believed a way around this in simple terms, was through redistribution from the government to some extent. Maybe not all the members of the Stockholm school but they were aware of this issues. Until the world gets better in terms of monetary theory and policy, the best we personally can do is not go into debt personally. Even if the US debt to GDP increases and it is an anchor and drag for economic growth, that does not mean it has to affect you. Even under communism in Eastern Europe, people made money in capitalistic ways. People in the countryside in particular were better off than people in the cities for this reason. In the countryside, if you have self-sufficiency, you were well off. My school of thought, I wish I could be Austrian but they are a little extreme on some views so if I were to categories myself maybe I would be Wicksellian, taking into account his latter writings. Wicksell was a capitalist but also pragmatic about some issues as monetary policy and wealth.
I'm doing all this, not spending, holding lots of cash, will work for any rate, don't drive anywhere, don't eat out, don't do anything. this depression will last 15 years easy,
First time I hear a CLEAR explanation of the cause of the great depression. ( The Austrian version that is)
Interest-rates have been low, many times, since the Great Depression, for years at a time. Why did that not cause another financial collapse?
@@regularfolks8285 - The collapse happens when rates rise substantially.
There is a good deal to be learned by studying how depression triggers aligned in the past. So, to understand why the "Great Depression" occurred in the 1930s, one must look at what occurred during the years building up to the crash.
A significant amount of the credit made available during the 1920s went into land speculation. A good primer on what occurred is found in the book "Only Yesterday" by historian Frederick Lewis Allen. Not only did investors become captured by the frenzy of the Florida land boom, this same frenzy occurred in many cities in response to population increases that triggered a significant increase in the demand for both commercial and residential land. An agricultural land boom also occurred during the First World War, during which time farmers borrowed heavily to expand their land holdings and production. A few years was required after the war ended for European farmers to recover, but by the mid-1920s global production exceeded demand, prices fell, farmers defaulted on loans when government guarantees were removed, and rural banks failed by the hundreds.
As the land boom crashed, investors shifted heavily into the stock market, driving up prices well beyond what any fundamentals supported. Thus, by the end of 1929 the U.S. economy was stressed across almost all areas of production as well in the financial markets. To be sure, imprudent bank lending deepened the crash and lengthened its duration, but it was a crash in the making because of the failure to utilize tax policy to tame the credit-fueled, speculation-driven land markets. A few economists (e.g., Harry Gunnison Brown, Scott Nearing and John R. Commons) had argued the case made in the late 19th century by Henry George, who showed that cyclical booms and busts would be tamed only if the full or nearly-full public capture of the potential annual rental value of land and of rents from other sources (e.g., the broadcast spectrum) became public policy.
Harry Gunnison Brown was joined over the succeeding decades by a small group of economics professors who continued to make Henry George's case. One could argue that recessions that began again following the end of the Second World War would have been even worse if local governments did not capture some land rent via the taxation of real estate. However, as land prices climbed property assessments rarely kept pace. This made speculation in land an even more profitable investment.
Relying on out-of-date assessed valuations rather than current market values created a serious analytical problem for government statisticians. They simply did not understand that any increase in the price of land is inflationary and did not include such increases in their calculation of inflation. Another failure has been to accurately calculate the annual aggregate rent that is privately captured as unearned income (whether imputed or actual). Since the administration of Ronald Reagan, the federal government has not monitored land prices. The figures utilized in the econometric models relied upon by the Congressional Budget Office and the Federal Reserve are around 5 percent of the actual potential rent in the economy (see Joseph Stiglitz or Mason Gaffney on this particular problem).
I offer here a very rough estimate of the rent attached to just one part of the economy, the residential property market. At mid-2020, the median price of a single-family property was around $295,000. There are about 140 million existing housing units in the United States. If we assume a fairly conservative median land-to-total value ratio of 35%, this means that the aggregate residential land value in the U.S. is $103,250 per property, multiplied by 140 million = $14,455,000,000,000 ($14.455 trillion). Economic theory tells us that this aggregate land price occurs because of the capitalization of the net amount of rent that remains in private hands after taxation. If most or all of the rent were captured via taxation there would be nothing to be capitalized and land prices would fall to very close to zero. What the rent fund might be depends on the discount rate. If we assume that investors will invest in land if they can obtain an annual increase of 5%, the the rent fund would be calculated as follows: 5% of $14.455 trillion = $722.75 billion of rent JUST for the land under existing residential buildings. Add in the number of vacant residential lots around the U.S. and this figure will increase considerably.
Tragically, the public capture of land rent never became public policy, allowing the land market cycle to operate from boom to bust. It is on schedule to crash again in 2026. I have prepared a relatively short video in support of this forecast for anyone who reads this and has an interest in more details:
czcams.com/video/fmA6ZPs-wus/video.html
I used to think everybody went broke during the Great Depression and other major crashes but they didn’t… Some made millions, I also thought everybody went out of business during these times but they didn’t, some went into business, there's always depression/recession for some people and there's always a good time for others, it's all about perspective.
First step is discovering loopholes to generate gains during volatility, It is very possible to retire big time from the current market condition without having to hold stocks long term.
most of these strategies and loopholes are better managed by experts and pros in the market, the average Investor on the other hand are left to suffer during a crash.
The issue is people always have the “I’ll have to do it myself mentality” Unapologetically, that’s why the get heavily affected during a crash and coupled with the fact we’ve had the longest bullrun ever in the American history, most folks aren’t equipped to manaqe this crash and it’s impending opportunltles well enough, so it only makes sense to seek proper guidance during these times, that’s what lnvestment-advlsers are for, been using one ever since the pandemc 2020 and I’ve been barely affected by crash, I have $850k in profit sitting in my portfolio and I’m unbothered about the market outcomes.
Well if isn’t that the hard truth…this investment-adviser that guides you must really on to something…who is he?
It’s a She actually, ' Catherine Morrison Evan, I initially came across her on a CNBC news report then on smartadvisors and I decided to hit her up. Best decision I made to stay afloat 2020.
Economics professors, they can predict the past with 100% accuracy.
Excellent explanations but the 1812 Overture in the background is annoying.
Good video. You basically nailed the main causes but you naively think the Fed didn't know exactly what they were doing and were guessing? Big mistake! You need to go back further in monetary history.
How so?
Yes, please explain
I am watching this for the first time in Dec 2023 and it seems even more topical than when it was produced 4? years ago. I would love to see an up to date analysis based upon similarities to today. In particular I think (but don’t know) that Fed rates settings/tinkering are now more than ever affecting the disequilibrium of global interest rates through the Eurodollar market and the fact that most trade transactions are conducted in the USD?
Thanks, Peter; I really need to update this and more for 2024. I hope to finish my PhD soon so I will have more time as there is a lot to discuss related to what you said and the natural rate of interest.
I been watching a lot of video to learn about the cause of the Great Depression. This video is one of the best out there. It taught me so much more. Thank you for making this video. It deserve more viewing. :)
Thank you, I think the Wicksellian Natural rate of interest is something not covered in most courses in Economics.
Econ Lessons Yes because it doesn’t exist
Will there be another Great Depression? What does economic theory tell us about the current economic conditions which in some ways parallel the 1920s and 1930s in terms of monetary policy and money? Perhaps it will not be exactly the same, but it does question the Federal Reserves' monopoly on the most important commodity in our 'free' economy.
Free economies ban beer or plant leaves? Why did the crash begin during prosecutor Willebrandt's serialized exposé of asset forfeiture as an enforcement tool?
Well spoken and cogent explanation, thank you, you explained some elements I had been hazy on!
This never explained how and why the financial markets crashed @0:40 which caused the GP. Banking is very simple math.
We are not talking about regular banking, where you take a loan out, then pay it all back in payments, with simple math being used to figure out loan payments plus interest.
No. We are talking about "investment" banking that caused the GD. Then in conspiracy theories blamed the Jewish people for the bad mathematics.
Everyone putting money in investment banking and everyone taking out more than they put in is impossible math.
Take any company back then involved in investment banking as an example. Take a close look at their finances. They were not paying back their business loans in payments plus interest. They were "investment banking." A pyramid scheme and it crashed.
If a company is not paying back their lenders back, back 100% plus interest, how are the investors getting back 100% of their money plus interest?
Investment banking vs regular banking
They forgot something; Investment banking still needs to pay back its investors 100% plus interest. Just like regular banking, but higher interest.
They didn't forget; they are con men. There are con men out there. And everyone got conned.
You would think our government would arrest these con mem?
You are an absolute legend. Thank so much , it was really really good. I learned so much
Very good pocast. Thank you! (Background music didn quite work for me.)
Wow……very well done sir!
A++++++++ on your explanation!
I agree with others who say this is an excellent explanation of what caused the Great Depression. Good Luck with completing your PhD.
My question to you is which of the two main models of Economics do you think is best for humankind, Austrian or Keynesian Economics or a combination of both? Since the Federal Reserve has mostly employed Keynesian Theory for making decisions since its inception, my vote is that we try Austrian Economics for the next 50 years. But, alas as you have said in other videos people just don't like living within their means.
For Monetary Policy a productivity index, for now while we have central banking. That is, prices should move inversely with productivity or set the natural rate of interest to the BLS profit rate which would achieve that. The Stockholm School like Erik Lindahl and David Davidson and Austrians like Hayek discussed that. That would be optimal monetary equilibrium. We would see interest rates may be at 7% generally which would reward savers more than consumers. At 2% of people can not live in their means, including governments. At 7.5% people might think differently. To make things fair, a negative income tax like Milton Friedman suggested, is the most efficient.
Excellent. Thanks
Thanks, I could improve it but the basic idea is everything you learned in school about the Great Depression was wrong if you are looking for causes and cures.
11:40 yes that seems correct, as well. idk what was and wasnt known when. you just have to keep if flowing and *stop it accumulating* , and apply that to credit as well. & credit is also a commodity.
Excellent video!!
This discussion needs to include the newly formed federal reserve central bank.
Sticking a knife in all the other banks by restricting what money was available at the time.
The Federal Reserve Act addressed these perceived shortcomings by creating a new national currency-Federal Reserve notes-and requiring members of the Federal Reserve System to hold reserve balances with their local Federal Reserve Banks.
State-chartered banks were also eligible for membership if they met certain criteria. State members became subject to federal banking regulations and supervision, however, which in many cases were more strict than state regulations and oversight. Consequently, few state banks joined the Federal Reserve System in the early years.
The Federal Reserve Banks are owned by the private commercial banks whose goal is to maximize profit. Lower interest rates are more conducive to generating a greater profit. Hence, the Federal Reserve has a tendency to encourage malinvestments through pursuing a loose /easy monetary policy.
Superb explanation!
Excellent info, format, video . Music in background while time period appropriate is at times distracting. Overall very good.
Thanks and I will keep that in mind when creating videos about the music.
It's important to think of this in terms of boot straps. I used to be a Commie until I learned about the value of boot straps. Even if a person does not have boots or shoes, they can use Crazy Glue and attach the straps directly to their bare feet and pull themselves up that way.
Enjoyed the video
Complicated but best video explanation.
Thank you, I need to do a more concise video but working on my research and have no time at the moment. My research is connected to the natural rate of interest.
The great depression was caused by Wall Street and all the greedy investors. And it's the exact same way right now. They got the market way overinflated. And the housing market is overpriced as well. People buying houses during the pandemic bidding 100 thousand dollars over asking price for a home. It was fueled by greed. Every investor wants to screw over the next one. It's all about money with humans. Let me tell you something. Money does not feed you when it becomes worthless paper. Buy land now to grow food on. That's worth way more than all the stock on Wall Street. We got a major depression coming in a couple of years. Pension funds and social security will be wiped out. Nobody is safe
Yes but why was there that opportunity? It was not just a wave of animal spirits that pushed the country into Depression. There was something that was more systemic than that, specifically the wrong price interest compared to the intertemporal valuation of money
Blaming greed is like an aeronautics mechanic blaming gravity for a plane crash its up to the fed to control greed seeing as it the only real constant
Obviously, you are biased toward the Austrian theory, since you've failed to mention the fact that the gold standard forced the Federal Reserve to raise interest rates. Not only did the United States' gold standard prevent its economy from recovering in due time, which was not an issue in countries that were quick to get rid of their gold standards, but it is clear that the Federal Reserve tightened the money supply to defend the indefensible American gold standard, that the rest of the developed world abandoned, and doing so resulted in quicker and stronger recoveries.
The Great Depression of 1921 never happened under the Gold Standard nor any other cycles before it. It was because the US left the Gold Standard even if they retained it in name, when they bailed out the UK who was having monetary issues. Providing liquidity to the system is nothing more than giving the bankers money, at the expense of the people. If the New Deal was so great why did it take 20 years to get out of the Great Depression?
Econ Lessons How do you figure? The gold standard was very much in place during the outbreak of World War I. Sure, reserve requirements were changed and the US treasury had a lot more influence over the operation of the Federal reserve, but the US did not suspended the standard, unlike Austria Hungary, Germany, France, etc. And if you are trying to attribute the Depression of 20-21 to some sort of bad action on behalf of monetary policy, that’s just simply dishonest. The depression was a post war, deflationary recession caused by the change of American (and European) production during the war. Not to mention the Federal Reserve used brutal contractionary monetary policy that made the depression worse than it should have been, by raising interest rates up to 7%. Providing liquidity to banks is giving bankers money at the expense of the people? I would be afraid if you were in the Fed during the 08 recession. Home prices fell by more than half between 2006 and 2009, and most Americans were making payments for their mortgages. If large banks were to fail the crisis would have probably exceeded the Great Depression, given that the stability of the entire financial system would have been at stake. The New Deal significantly helped the depression recovery, and I do agree that it was slow, but this is because of half measures and appeals to fiscal conservative an FDR made in implementing the new deal. FDR feared budget deficits, and allowed fear mongering over the risk of spending too much to take him over in the late 1930s. This convinced him to run a budget deficit in 1937 which, subsequently, prolonged the depression recovery by triggering a second recession. Compared to the spending on World War II, the New deal was almost nothing. FDR was not bold enough in implementing the necessary recovery policy.
Thanks!
Thank you very much sincerely. Every little bit helps and helps my research. I hope to finish my PhD soon and improve such content. Thank you Delongbear! Mark
*the pretend number gambling doesnt mean anything, only the ppl and their faith does: anything that suggests austerity in crisis is inherently definitely wrong.* no shorting or stock buybacks, ever, is a no brainer as well. gr8 vid.
Hence the stock of capital and the level of employment will have to shrink until the community becomes so impoverished that the aggregate of saving has become zero, the positive saving of some individuals or groups being offset by the negative saving of others. Thus for a society such as we have supposed, the position of equilibrium, under conditions of laissez-faire, will be one in which employment is low enough and the standard of life sufficiently miserable to bring savings to zero.
John Maynard Keynes: The General Theory of Employment, Interest and Money, Chapter 16/III
We are so screwed. I wish I knew how to preserve wealth. I’m really diverse in assets but feel like it won’t make a difference either way.
You can preserve and build wealth in a bull or bear market. Fortunes were made in the Great Depression as well as every other business cycle. The key thing is to focus on productive activities that add value. I believe personally in undervalued real assets for a store of value or even their proxy, and financial assets are doing something productive for paper assets. However, no one can predict the future so we might as well not worry about something that might never come to be. The theory is correct, and they misestimate the natural rate of interest and set the Fed Funds rate too low relative the NRI, but if you know that, that is important information that you can use.
1920, 1907, 1893, & 1873 are undeniable proof of the austrian school. Their cause was that of monetary expansion/exchange rate devaluation prior, & a subsequent quick correction without intervention. Only times we didn't see a quick correction was when we bailed out the economy &/or implemented wage & price controls.
I do lean theoretically toward the Austrian school as a primary cause of the business cycle; thank you for the comment. The Stockholm school also has similar elements, as they were the first to develop Wicksell's natural rate of interest. Look into Erik Lindahl and David Davidson for example.
Can’t wait to show this to my 8th grade students! 🤣
Should be easy for them to follow!!
By the way, I’m sure this information is incredible. I just can’t wait to get a good look at their faces.
Further to my previous comment I now wonder/again don’t know: With the declining populations of the world’s richest Countries, whether we have now reached or are approaching “peak debt” where more debt is repaid than is borrowed. If “peak debt” exists then demand/supply may no longer apply-ie regardless of interest rate the rate of change of the amount of debt is no longer positive-resulting in overall negative world GDP into the future. So many questions/so few answers - I probably need to get a new hobby!
I have to think about what you wrote. I believe it is intriguing and this is an excellent hobby.
29-54, 25 years of a depressed market.
It was actually 4 short recessions that FDR government policy kept going to make people dependent on government. Otherwise, it would have ended in 32-33 time frame (if not sooner).
I personally believe, let the markets work and adjust prices; the faster this happens, the quicker the economy recovers. However, government intervention back then was a fraction of what it is today, so it would be hard to measure unless we had two parallel economies.
@@EconLessons Thank you for stating that this is a belief. Watch out for conclusions reached which conveniently align with an article of faith you have accepted.
All economic depressions and economic collapse of countries boils down to two words: Collectivist Policies!
Economists are very good at describing economic events but don't really have any idea why they occurr. The Great Depression was caused by the incompetence of the Fed, incompetent politicians and incompetent institutions that allowed reckless borrowing and uncontrolled speculation (very similar to 2007/08).
Yes, and that is why, in this video, I describe the mechanism for that chain of events.
@@EconLessons exactly!
I have better answer:
1. Algorythms.
2. Socio medial marketing @ primary sql with monetizing 2 pass.
3. Information filterring.
4. Validating up to date.
5. Instant utilisation.
U like it don't ya?
THE GREAT DEPRESSION
STARTED ON THURSDAY
11 DEC 1930 WHEN THE
FED REFUSED TO LEND
MONEY TO THE "BANK
OF UNITED STATES" AT
77 DELANCEY STREET
IN MANHATTAN, NEW
YORK CITY. IN OTHER
WORDS, THE FEDERAL
RESERVE CAUSED THE
GREAT DEPRESSION ! ! !
🔷🔷🔷🔷🔷🔷🔷🔷
🇺🇸 Marc J. Metivier 🇺🇸
The fed opened furnace door a shoveled millions and millions of paper dollars into the flames
Since when is the Austrian school of economics mainstream? It is heterodox as well.
It is heterodox in a textbook sense but social media and many people today are Austrian libertarian Classical liberal
@@EconLessons agreed. In US social media, in an economics context, Austrian economics is quite popular, especially among US libertarians, right libertarians (not to be confused with left libertarians, which I’d argue are classical liberals). However, in an intellectual/academic sense, it is very much heterodox. I had assumed your perspective in the video was in the latter sense. Thanks for the clarification.
The Federal Reserve was enacted in 1913. Sixteen years later we have our first major depression. Coincidence? I think not. Coincidence, is what the government uses when they want to lie to you. The private sector had been making great financial strides since the "Industrial Revolution". It would be the 1st time the elite families, running the Federal Reserve, would make a power grab. Many opposing the Federal Reserve were on the Titanic. We all know what happened to that boat. Three times crews have been sent to investigate the wreckage. Three times it has ended in disaster! Coincidence?
Salut!
The Federal Reserve was created after another stock market collapse, 1907. That is when the huge privately owned banks ended up increasing the money supply themselves and picked the winners and losers. Congress decided the winners and losers should not be picked by a handful of bankers in a back room with no public knowledge.
Nixon said follow the money, economist says follow the money supply
I enjoyed that, but the background music is VERY VERY distracting.
Noted. Most documentaries have music but I will have to better coordinate it. This was my first attempt at a longer video.
Agreed. Some background music is okay, but, remember, subtlety is key.
The cause was 10% margin buying and bank failure
That tells nothing. What caused the bank failures? An inordinate expansion of credit in the 1920s. In 1927 the US central bailed out the Bank of England and expanded the money supply even further. Saying Bank failures and wildcat speculators are the reason is not precise, these were symptoms not a cause. The cause was a distortion of the capital structure caused by world governments departures from sound or honest money.
@@EconLessons It was a ponzzi bubble that burst
@@EconLessons This was man made.
And it is even worse in SEA countries now.
These methods are unsound. I am adding separate comments because they keep disappearing form some reason?
The govt should have allowed farmers to pay their taxes with food the food could then b distributed to the people. The farmers wouldn't have lost their farms.
Yes we are in another boom period. But it shows signs of a decline. The same immutable ‘laws of Economics’ I suppose.
There another sure thing: Working and poor people will take the hit as always.
😌🎱🙏☎️🦸🔌👑🎬🙊🪖🫁🎓👃🪤🕶️🧤🪠🕷️🎩📹💰💰💰💰💰💰🎧🥅📢💎🏆🏆🏆🏆🏆🏆🙉🏧📀🌐📱🦻🦻🛵🛵🛵🛵🛵🛵🔋📟😘
The Federal Reserve, established in 1913 along with the I.R.S. is illegal and was not approved by Congress. During the Great Depression my family was destroyed because their bank along with 8,999 other banks closed their doors then the strong arm thugs of the IRS forced their way into these banks, took the peoples savings then broke open the safe deposit boxes and stole cash, jewels, bonds, Gold and Silver coins etc. My uncle died of starvation on a country road looking for work. NEVER put your money in a bank !! Ask your banker to see the little card you signed when you opened up your account and you will see it says any money you deposit in your bank belongs to the bank. Thank you OBAMA. He passed this bill.
The Federal Reserve Bank of the US has not helped retain the value of the currency since 1 dollar in 1913 is worth 4 cents today and it prolonged the Great Depression and the Great Recession by not allowing market prices to prevail. I do not have enough information to assess the constitutional legalities of the IRS but I would say that the US had many years without a national income tax and we were a prosperous nation.
Data shows that growth rates before 1913 were higher than they are after 1913. The evidence is business cycles were less severe and the distribution of income was more equitable with that growth. There are many variables, however, if I were to speculate I would say, it is largely connected to the conception that we need monetary and fiscal policy instead of free markets.
I could be wrong I think the idea of this video is to provide two theories of what caused the great depression in an objective way.
I came away from the video, feeling that this guy had a bias towards the Austrian explanation. Any thoughts?
I am partial to the Austrian explanation. It was an over-expansion of credit but defined in the context of the natural rate of interest. To make a claim that credit has over-expanded is not good enough. You have to base it on something. However, I am not totally an Austrian economist. Perhaps more from the Stockholm School.
Sounds like now in October 2022
Could be but the economy is more resilient as wages are flexible today in contrast to the 1930s. However, that being said, it will be an interesting next few months to watch economic events unfold.
excellent..... loss of confidence... central banking caused it...
Business cycles before the central banking era were by any econometric measure less serve than after. I do not know why it is so heterodox to see the relationship between sound money (Mises) and a sound economic system in contrast to fiat money and an economic system built credit. The era of central banking has brought a less than optimal economic situation to developed countries including a disparity between rich and poor.
@@EconLessons Red tape manipulation tactic. You did that well. People are waking up.
Shasta Y. Spot-on
@@tammyileene4060 I hope more and more people become aware of a very real power that looms over them, that is the monopoly of the Central Bank.
@@EconLessons There were terrible "panics" -depressions- in the 19th century including right up until 1907 before there was a "central bank". The Panic of 1893 lasted most of the Gay Nineties. The Panic of 1907 is why the Federal Reserve System was founded. Those panics were all during the wonderful times of the gold standard, too. There's no easy fix to these problems, but the Austrian Economic System, with Mr Rothbart (shades of "Swan Lake") isn't it.
Keynesian economics is nothing but an elaborate sophisticated scheme enabling the financiers to steal from the unsuspecting working class in much the same way as the money changers were bamboozling the people that came to the temple with their offerings.Jesus chased these thieves out with a whip .Next time He will cast them off the earth for their treacherous thievery and insatiable greed.Austrian Economics is based on an honest gold standard and a just scale of balances not a phoney fiat currency.
Thank you for the comment. In the general and CZcams sense I trend to agree with you. You expressed in a clear way. I wish we had sound honest money. In Academia, which I am in, I do not think the Keynesians think consciously they are doing this, rather they are more about building econometric models which will support their ideas. However, the complexities of their models like in Michael Woodford's book Interest and Prices, someone whom I respect but disagree with, is build on a system of money that is less than optimal for freedom and growth and development. The Keynesian models have this systemic issues, connected with fiat money. I also think as you do it takes from the poor and gives to the rich in an indirect way because there are always first receivers and last receivers of money. I do not think the Keynesian theorists in any way are malicious, rather smart people operating on a paradigm that is outdated, however, connected to politics so difficult to replace. Keynesian economics does negatively affect people's lives. In contrast, the Austrian ideas of free money or a Gold standard would lead to a more market solution, and greater prosperity for all. I do not necessarily mix, Politics, Economics and religion as they human ideas and human institutions. The Ultimate reality is about transcendence.
We got 50% unemployment now,
A major issue now is underemployment. People can find jobs...at the local dollar store.
The great depression lasted so long, around a dozen years, because the federal government stuck its know-nothing dirty hands into it. A free-market, capitalist economy, if left alone, will always work itself out by letting the weak/incompetent businesses fail and the strong/competent businesses succeed through competition which always allows for true price discovery for labor, goods and services.
Nod, Let the markets work.
That’s a lot of words for supply side economic theory. Because the facts are facs every single time without exception supply side economic principles have ended disastrously! the truth is Keynesian got it there closest. When you have a dynamic population putting pressures on the system infrastructure of your society and you did not expand that infrastructure you’re going to cause recession! Without question end story simple as that nothing more nothing less quit giving rich people money and start investing in your country infrastructure so you can expand with the population that is a dynamic thing it’s not static! If you are static while your population grows you will be static economically! Dynamics broth causes dynamic Guelph! You have to invest in infrastructure but every 12 to 14 years. It always pays back in dividends it has never not paid back it’s always paid off every single time! Supply side of the Head without exception every single time ends in disaster it is but never did that it’s always ended in fucking disaster every single time without question every time every time when you invest in the country every single time it works without question throughout history you just look back that’s what happens. You can lie about it if you want to but that’s a fucking fact! Keynesian principles were fundamentally spot on. We went from soup lines to building the Hoover dam and other great infrastructure like the highways across the America that services to this day they pay a dividend just like they always do and always well don’t give money direct people they don’t fucking need it.
"The Guilted Age before the Federal Reserve"
Why was the federal reserve established?
What about the panics of 1819, 1837, 1857, 1873 and 1893 with high unemployment and runs on banks with no Federal Reserve? Interest did NOT find it's "natural" rate. Why were workers always on strike throughout the country? If the wealthy owners, major stock holders and executives took less of the wealth provided by the labor of common men, as was the case after World War Two for at least four decades, credit wouldn't matter as much.
Yes the federal reserve did play a role. The reason being that there where three republican presidents prior to the Great Depression who appointed the members of the board of directors and chairman of the Federal Reserve. In 2007 Bernanke took responsibility because he was George W Bush's fed chairman. Ask any republican president how they feel about the "administrative state" of which the Fed belongs!
This video is conservative propaganda.
Econ lessons: REPLY- There is a lot of information you are trying to convey here. We can take it piece by piece. I would recommend we remove discussions about Republicans or Democrats or words like conservative and look at facts. We can take one issue at a time if you want. Let's start with 1819. The Economist Murry Rothbard wrote a book on this which is based on research and factual data. You can find that here: cdn.mises.org/The%20Panic%20of%201819%20Reactions%20and%20Policies_2.pdf I am not sure if the book is peer reviewed. But let's examine the underlying premise, the panic was caused by printing fiat money to finance the war of 1812. In Wicksellian terms, the natural rate of interest was above the market rate at the time because of this government intervention into the market mechanism. The banking system was strained in terms of reserves against species and this caused, and the suspension of backing. Banks popped up everywhere as fiat/credit was replacing hard money. The boom leads to an ABCT bust. So in your first case that is a government-created panic."
My reply #1
I recommend this book. It deals with facts concerning the 1819 crash. www.perlego.com/book/1704480/the-panic-of-1819-the-first-great-depression-pdf
-I recommend naming the fact that conservative, republican/ corporate support of Laissez-faire economics / “free enterprise” favoring the wealthy over the common man as a cause of every single economic disaster in the history of this country (at least following the civil war).
Here are some RELEVANT facts. People cannot sustain living mostly on credit. People live on credit because they are scammed into it by plutocrats who’s primary desire in life is to own the world. Corporations withhold compensation from the labor that sustains them to keep it for themselves. It is wealth inequality that causes imbalance and catastrophe! Prior to the Great Depression a small percentage of individuals owned a vast majority of the real wealth in the United States, leaving everyone else with credit and speculating on stocks in a vain effort to relieve their burden!
Interest rates are a symptom, NOT a cause! The 1819 panic was caused by a number of factors beginning with Europe’s crop shortages and land speculation in the western states due to the higher crop prices. This resulted inn the shortage of species that led to Bank of the United States to issue fiat money to pay off debt. The issuing of fiat money had zero to due with interest rates but was a result of a lack of standardization as a result of conservative / corporate opposition of federal involvement in the economy!
*25:30** true enough: but as long as thr is capital collection to monopoly, thr is no innovation or competition either.* also - labor & other countries. & hiding capitol out of the country. h8 to say it, but regulation enforcement is the answer. criminal. including the top 10% of investors in bad actor companies. along w all directors, etal. & limits on amount of capital allowed. markets can only cause harm, *we arent starting from scratch you dope. we start w the billionaires and trillionares: the problems are baked in to being allowed to accumulate capital.*
WOW... What was that phrase that Bush #1 used ? ? ? Voodoo Economics.... Well I think that's the most appropriate term for this video .... Voodoo Economics...
The idea that steering the economy with monetary policy over trusting the free market collective coordination of individuals acting on enlighted self-interest to give market prices is an economic paradigm that seems to even now, becoming more entrenched. Depending on the severity of the next business cycle, we will see how much people will wake up. We can never give up trying to clarify the issues.
It would be much better without the overly strong classical music... lol
this was a poor presentation of the monetary problems preceding and during the depression. the author continually has to use explain "in other words" what he means by dis-equilibrium. that's because the term doesn't mean anything. Consequently he babbles away while trying to get to the point--the Federal Reserve allowed the money supply to contract during the first 3 years of the depression.
You have trouble understanding the idea that the Federal Reserve caused the great Depression because it created the boom or the roaring 20s through easy money? What specifically and theoretically do you now understand or disagree with? The first 3 years did not cause it, it exacerbated it. What is your definition of money macro equilibrium? It is almost like your just blowing steam in your comment spam, rather than giving specific theoretical objections.
Coming from a man who has 2 subs on his channel and a 16-second video. And no specific rebuttal to the Austrian idea that credit expansion is the cause of the boom. It's OK you do not understand this just do not spread bad Karama with comment spam.
@@EconLessons Mark--sorry for being so dismissive. Listening again to your video, i agree totally with you're point of view but found your explanation trying to suffer thru because of your use of terms like monetary dis-equilibruim and the comparisons of the demand for money with the sales of potatoes. Wouldn't it be easier to say that the money supply was too great in the 20's due to low interest rates and the low the fractional reserve requirements set by the Fed for commercial banks (3% on time deposits) which facilitated irrational exuberance (e.g., real estate speculation, excessive margin buying in the stock market) and then too LOW , after the 1929 stock market crash, due to the Fed essentially restricting the money supply by allowing banks to fail which reduced the overall money supply by a third and effectively dried up all credit needed for any growth?
@@waynekirsner7667thank you for the reply, sorry if I rebutted too hard. Yes if I were to create the video again I would have done it differently and with more polish. I teach and am in school and the images alone too most of the time. I would have polished the script better and my understanding is evolving. However, the conceptual framework is right. Q of money was not the issue in the intermediate term. Further, interest rates understood as too low or too high or too much credit or too little are relative terms. These in themselves only have meaning in relation to the natural rate of interest, something which Knut Wicksell 1898 and Mises 1912 interpreted further. In modern term Woodford 2003 and the Fed/US model R*. It is this framework the DSGE model and monetary policy operate. Understanding the rates relationship to the in natura rate and how it affects the capital structure if the subtle point people miss. Further, there are multiple natural rates and multiple equilibriums. The money supply was not the key. I know Friedman and Schwartz in 1963 interpreted it though this lens, but the quantity of money was not the issue. It was the interest rate, which is an intertemporal price gave wrong signals and distorted the capital formation process. The Q theory of money is long-term. That is why Wicksell's theory was needed. That is relative interest rates. To over simply like people do will lead to wrong conclusions, like the money supply expanded or contracted too fast. It was about a price. Prices matter. Specifically, the price of interest, the marginal productivity of capital in a barter ratio world compared to the real world of monetary economics.
Thanks for the reply. When I say the money supply contracted (or you say the interest rates were too high which I wasn't aware of), aren't we describing the real problem that it was very difficult to get a loan from a bank to either start a business or stay in business and, separately, deflation motivated people to hold money rather than spend it and therefore cut demand. Allowing the banks to fail (i.e., not supplying them with cash thru the Fed) drastically cut the money supply available due to the fractional reserves
All of these theories are based on assumptions that "natural" rates of interest, inflation and unemployment ..... exist. Your conclusion that the Fed caused the great depression is an unproved hypothesis. This happens, IMO, because you have a deep intrinsic faith in markets as the great solution. But, as with all matters of faith, such things are actually deep assumptions, not provable facts. Also, you neglect to consider that the great depression was a global phenomenon not in any way limited to the United States. Finally, it is objectively true that the massive spending to ramp up for and fight WWII definitely ended the economic depression in the US. This wasn't because of the Federal Reserve's actions or inactions .... it was because suddenly there was a compelling reason to hire people and ramp up production no matter the cost or financial consequences. When a war needs to be won, the government borrows and spends like crazy to survive.
Natural rate of interest is an abstract concept, like in physics there are abstract concepts. However, it does exist. There is a rate of interest that corresponds to the expected return on newly created capital.
Government run money. Oh yeah this can't fail!!!!!!😂😂
Its too big to fail :)
"The Guilted Age before the Federal Reserve"
Why was the federal reserve established?
What about the panics of 1819, 1837, 1857, 1873 and 1893 with high unemployment and runs on banks with no Federal Reserve? *Interest did NOT find it's "natural" rate.* Why were workers always on strike throughout the country? If the wealthy owners, major stock holders and executives took less of the wealth provided by the labor of common men, as was the case after World War Two for at least four decades, credit wouldn't matter as much.
Yes the federal reserve did play a role. The reason being that there where three republican presidents prior to the Great Depression who appointed the members of the board of directors and chairman of the Federal Reserve. In 2007 Bernanke took responsibility because he was George W Bush's fed chairman. Ask any republican president how they feel about the "administrative state" of which the Fed belongs!
This video is conservative propaganda.
There is a lot of information you are trying to convey here. We can take it piece by piece. I would recommend we remove discussions about Republicans or Democrats or words like conservative and look at facts. We can take one issue at a time if you want. Let's start with 1819. The Economist Murry Rothbard wrote a book on this which is based on research and factual data. You can find that here: cdn.mises.org/The%20Panic%20of%201819%20Reactions%20and%20Policies_2.pdf I am not sure if the book is peer reviewed. But let's examine the underlying premise, the panic was caused by printing fiat money to finance the war of 1812. In Wicksellian terms, the natural rate of interest was above the market rate at the time because of this government intervention into the market mechanism. The banking system was strained in terms of reserves against species and this caused, and the suspension of backing. Banks popped up everywhere as fiat/credit was replacing hard money. The boom leads to an ABCT bust. So in your first case that is a government-created panic.
@@EconLessons -I recommend naming the fact that conservative, republican/ corporate support of Laissez-faire economics / “free enterprise” favoring the wealthy over the common man as a cause of every single economic disaster in the history of this country (at least following the civil war). Here are some RELEVANT facts. People cannot sustain living mostly on credit. People live on credit because they are scammed into it by plutocrats who’s primary desire in life is the own the world. Corporations withhold compensation from the labor that sustains them to keep it for themselves. It is wealth inequality that causes imbalance and catastrophe! Prior to the Great Depression a small percentage of individuals owned a vast majority of the real wealth in the United States, leaving everyone else with credit and speculating on stocks in a vain effort to relieve their burden!
Interest rates are a symptom, NOT a cause! The 1819 panic was caused by a number of factors beginning with Europe’s crop shortages and land speculation in the western states due to the higher crop prices. This resulted inn the shortage of species that led to Bank of the United States to issue fiat money to pay off debt. The issuing of fiat money was had zero to due with interest rates but was a result of a lack of standardization as a result of conservative / corporate opposition of federal involvement in the economy!
CAUSE OF DEPRESSION = CAPITALISM! CURE = SOCIALISM! Very simple!
Hoover's pro labor policies - Guy is smoking dope!
North Korea, Cuba, Soviet Union, Venezuela compared to USA, Ireland, Malaysia, Switzerland.
@@EconLessons nuf said 😆🤣
This comment is on 2-18-24 & Biden is starting WWlll
This entire video is at RATIONALIZATION based on misrepresentation of the facts. It was the three conservative presidents (“the business of America is business”) Warren G Harding ,Calvin Coolidge and Herbert Hoover who believed in individualist theories (look up ”individualism”) with the influence of large corporations and vastly wealthy individuals who favored corporations over the common man that caused the Great Depression.
“For the government to get involved [in The Great Depression] would undermine the independence that is necessary to self govern”
- Herbert Hoover
Not just Herbert Hoover but almost the entire Republican Party was practically kicked out of office based on this incredibly flawed reasoning. Democrats won a vast majority in all branches of government. It’s NOT “interest rate” imbalance that causes instability. It ‘s wealth imbalanced that causes instability! Interest rate imbalanced is only a symptom, not a cause.
It is not that difficult to imagine a household where the parents eat all the food and only give the children scraps.
Do us all a favor "Don't teach" in real life. Boring ! Wrong!
What specifically do you think is incorrect and how would you explain the Cause of the Great Depression? It is an honest question, answer if you can.
Aaaand no explanation came