Download Economics of the Great Depression

The Great
Depression
A Cross-Curricular Analysis
History, Economics & Mathematics
Resources
Federal Reserve Bank of St Louis
http://www.stlouisfed.org
GDP - Gross Domestic Product
Market value of all goods and
services produced
Depression vs Recession
A drop of more than 10% in GDP or a
drop in GDP for more 2 successive
quarters.
Inflation
A rise in the general price of goods and
services over time….
Or
A decrease in the purchasing power of
money caused by too much money
chasing too few goods and services.
Deflation
A decrease in the general price level of
goods and services – below 0% inflation.
CPI - Consumer Price Index
The CPI measures changes in the
price level of consumer goods
and services purchased by
households.
The Gold Standard
A monetary system in which gold
does not circulate but in which
the government agrees to sell
gold at a fixed price in exchange
for the circulating currency. In
the US, that fixed price was 40%.
What started it and why did it continue?
October, 1929
Date
Change
October 24, 1929 -33.02
October 28, 1929 −38.33
October 29, 1929 −30.57
% Change
-11.00
−12.82
−11.73
Close
298.97
260.64
230.07
Westinghouse lost 66% of it’s SEP value. Dupont lost 30%.
If one had invested in the market in SEP, 1929 and held their stock,
they would not have been able to recoup their losses for most of
their adult life.
Dow-Jones Industrial
Average
1920-1940
X
Smoot Hawley Tariff
June 17, 1930
20% average tariff rate but 60% on common items
Imports – 1929..$4.4B (4.2%) 1933..$1.5B
Exports – 1929..$5.4B(5.1%)
1933..$2.1B
Bank Failures – 1929 - 1935
Year
Number as of DEC 31
Suspensions
1929
24,633
659
1930
22,773
1350
1931
19,970
2293
1932
18,397
1453
1933
15,015
4000
1934
16,096
57
Data are from Banking and Monetary Statistics, Board of Governors of the Federal
Reserve System, 1943, pages 18 and 283.
The New Deal - Did it work?
SEC Acts of 1933 and
1934
Banking Act of 1933
(Glass-Steagall)
CCC- Civilian Conservation Corps
What finally pulled us out?
Allied vs Axis GDP - WWII
Country
1938
1939
1940
1941
1942
1943
1944
1945
Austria
24
27
27
29
27
28
29
12
France[1]
186
199
164
130
116
110
93
101
Germany
351
384
387
412
417
426
437
310
Italy[2]
141
151
147
144
145
137
117
92
Japan[3]
169
184
192
196
197
194
189
144
Soviet Union[4]
359
366
417
359
274
305
362
343
British Isles
284
287
316
344
353
361
346
331
USA[5]
800
869
943
1094
1235
1399
1499
1474
Allied Total:[6]
1629
1600
1331
1596
1862
2065
2363
2341
Axis Total:[7]
685
746
845
911
902
895
826
466
Allied/Axis GDP:[8]
2.38
2.15
1.58
1.75
2.06
2.31
2.86
5.02
Lessons
It’s a worldwide problem.
The best solution is to keep it from
happening.
Money flow is essential.