The Great Depression starting after the New York stock exchange collapse of 1929, has a few narratives in Economic schools. Here we will compare the Keynesian School's view of the Great Depression, and the Austrian School. Also, go over the events leading up to the crash.
Keynes School
The Keynesian model is what Central Banks, Government Curriculum, and CNBC and Fox Business commentators mostly agree on to this day. It's a new experiment, started during the chaos of the Great Depression, complex, and based on Central authority. Please see this well written Wikipedia quote from the Keynesian Economics Wiki:
Keynesian economists generally argue that as aggregate demand is volatile and unstable, a market economy often experiences inefficient macroeconomic outcomes in the form of economic recessions (when demand is low) and inflation (when demand is high), and that these can be mitigated by economic policy responses, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, which can help stabilize output over the business cycle.[6]
[4]
If you read the above summarizing Keynes' view, you will notice that he does not place any trust in the Market; further, he puts more trust in central authorizes to mitigate economic recessions. This is not free-market economics at all and is actually Socialist.
Keynes has placed all his trust in his University scholars and Central Banks to fine-tune the economic action of every market participant.
Keynesian-ism, as it was studied and advanced during and after the Great Depression, came up with endless experiments into manipulating markets. Today it has evolved into the standard way of thinking which is summarized in my view of the Television, "We need a central authority to mitigate the horrors of the market."
Austrian School
The best book analyzing the failures of Keynes and the Federal Reserve Funded New Deal is by Murray Rothbard, "America's Great Depression". You can skim or read the PDF for free on mises.org, which I have linked. Murray does a much better job at getting to the root of this argument in Academic Prose; he was also alive during it and was able to keep up with the barrage of new economic thought coming out at the time. I highly recommend both Murray Rothbard and Ludwig von Mises for deep dives into Austrian economics.
The Austrian model is studied by free-market economists who believe individuals acting in concert voluntarily outweigh any action that can be taken from a Central Bank or Government Economics.
Along with other branches of Capitalism schools like Milton Friedman of the Chicago School. I will let the Wiki summary of Austrian Economics speak for itself in comparison:
The Austrian School theorizes that the subjective choices of individuals including individual knowledge, time, expectation and other subjective factors cause all economic phenomena. Austrians seek to understand the economy by examining the social ramifications of individual choice, an approach called methodological individualism. It differs from other schools of economic thought, which have focused on aggregate variables, equilibrium analysis and societal groups rather than individuals.[48]
So now that we have learned about the two main schools studying this crisis, let's see what we can conclude of the causes and solutions to the Great Depression.
What we know prior to 1929 in the American market:
- Gold Rush's started to pop up before the Civil war**, the first one in North Carolin preceding the 1828 Georgia Gold Rush
- Andrew Jackson Vetoes the Second United States Bank Charter
- In 1835, Andrew Jackson signed into law a bill to open three branch mints: in Charlotte, North Carolina, and Dahlonega, Georgia, for minting gold coinage, and in New Orleans, Louisiana. The ones in Charlotte and Dahlonega were to mint the newly discovered gold.
-
The USA during the late 1800s was divided between the Confedaracy and Union
-
There was a renewed interest in Sound Money during and after the Civil War
- Central authorities in the Union were paying soldier's in "Green Backs". An early example of a major monetary decision to print paper money.
-
Settlers started to arrive in California, and even more Gold was discovered.
-
Massive investment projects by Market participants sprung up all over the USA, laying the base for the Middle Class of America. Bringing us out of an agricultural, plantation economy.
-
Later after the calm markets prior to the Civil War, the thriving American markets that sprung up around these Gold Discoveries, fertile land, new immigrants, new finance entry points for the average joe, industrialists and bankers started to overextend and emit credit so they could earn on Interest and Gains from other's projects.
-
In 1913, during the Holidays, the United States was taken over by a central bank, called the Federal Reserve
Many other technological advancements happened before 1913 and the market was in prime time for success for long term sustainable growth with minimal disruptions. A lot of young patriots who had an individualist attitude were killed off by the actions of Abraham Lincoln during the Civil War before the signing of the Federal Reserve Act. Perhaps that is how they snuck it in, as well as the complete focus on the Christmas holiday.
In the 1835 Congress, at least the United States was highly interested in the Economics of Gold and Sound money, rare money. Here is an excerpt from a free e-book: By Authority of Congress. The Public Statutes at Large of the United States By Richard Peters
After 1913 and leading up to 1929:
Interestingly, 1 year after the Federal Reserve, a World War broke out in Europe in 1914 with the US entering the war after the sinking of a ship called the Lusitania by Germans, which my Great Grandfather Hubert took to America escaping the German occupation of Belgium a few years before.
So 1 year after the Federal Reserve, we all of a sudden have a War that the United States wants to enter after emotionally responding to the Sinking of the Lusitania.
Also, during this time the American economy was thriving on this new central bank-backed credit system which convinced American bankers that they could safely leverage their clients. The Federal Reserve lender of last resort mentality and the belief of the Gold reserves of the US Federal Government led a lot of American's to believe credit was safe now. Playing into the hands of the rich.
The Morgan Cartel was competing with the Cunard cartel at the time. The Cunard family built the Lusitania and other Immigrant Liners.
The Lusitania and the Mauretania were built by Cunard and became major competitors of the Morgan cartel. It is an interesting footnote of history, therefore, that, from the Morgan perspective, the Lusitania was quite dispensable. [3]
JP Morgan, with his connections and office's right next to the New York Federal Reserve Branch, may have deceived the American public into entering this War that had nothing to do with America other than his competitor's ship being bombed by Germans.
Could JP Morgan and his Federal Reserve buddies come up with this crude murder plot to enter America into "World War 1"? It appears that some American's at that time thought were not happy with him:
On September 16, 1920, the building was the site of the Wall Street bombing, in which thirty-eight people were killed and hundreds injured, 143 of them seriously.[5][6] The building received heavy damage, with shrapnel entering the building through its large wide windows. To this day, the damage to the limestone façade is visible on the outside of the building, as the company said it would never repair the damage in defiance to those who committed the crime.
Thanks for reading, the next in this series will be researching Stock Market Crash Itself.
Sources
[1]
[2]
Contributors to Wikimedia projects.svg/1200px-Great_Seal_of_the_United_States_(obverse).svg.png)
[3]
[4]
Contributors to Wikimedia projects
[5]
Contributors to Wikimedia projects
