Lessons of the Great Depression
Causes, Effects, and Importance of the Great Depression 1929-39
The common assumption is that the greatest economic depression in modern history was triggered by the stock market crash of 1929, which caused panic sell-off. However there are other theories which are more fact-based and categorically explain the order of events during that period of time. The Great Depression is vital to remember, for all citizens regardless of economic involvement, because it shows that markets can take a 10 year down turn, and rebound overall; yet many people may lose everything in the process.
Keynesian institutional theory focuses on ‘spending demand’ as the key economic factor. Spending demand is related to consumer confidence. Monetarists believe that the Federal Reserve Bank should print more money, and allow the largest companies to profit MORE during a recession, in hopes that they will hire more I suppose; which is stupid because history shows that they keep profits and reduce work force during a ‘down turn’. Banks and companies tend to ‘hunker down’ during economic down-turn, so propping them up is NOT a solution to democratic economic health of citizens who may starve to death while companies replace their jobs with the cheapest solutions. Central bankers and Corporate CEOs are the new royalty in an oligarchy given power by commercial capitalist greed.
The effects are important to note – DO NOT put all your money into stocks, and then pull them out when their value is low, because people have lost all their savings that way!!! Those that do well, use bonds and diversify assets (cds, mutual funds, safe stocks). If they cash out their investments, they do so only when the amount they remove is MORE than what they put in. If someone invests with a company that goes bankrupt and stocks never go back up, that is a permanent loss.
The importance of the Great Depression is that memory of it shows that government economies may seem to fail over a period of 10 years, but after the 10 years, it can inflate back up at the SAME prices as before the deflation period. This may be due to exponential growth of population, greed of the oligarchy, and general stability of civilization. For civilization to fail significantly enough to cause a greater depression, a global catastrophic event would have to happen, the likes of which would have to at least be closer to the fall of the Roman Empire, if not greater. Debts become greater during monetary deflation. There can be no doubt that any greed driven system like Capitalism will be volatile and hostile to all classes confined within it. The failings of democracy within tyrannical Capitalism, shows that Capitalism has failed us only slightly less, but increasingly more, than the despotic models that crushed the inherent popular good will of Marxism before it (see USSR) even began. However if you can play the system with enough money, invest in environmental companies, because some companies are better for life on the planet than others. There are corporate investment companies waiting to take your order!
Sadly war and borrowing got us out of the Depression. Why can’t peace and saving get us out of the Recession?