Great Depression Essay

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Jimmy Roach Mr. Salisbury World History 4 October 2013 Great Depression Research Paper The Great Depression is by far the worst economic outfall that the world or the USA has ever experienced. Many say that the Great Depression was not the governments fault and that they did not play a major role in the events that led up to it. However it has been made very obvious over the years that the government played a huge role in the events leading up to the Great Depression and their poor decisions cause the terrible disaster that is the Great Depression. The Federal Reserve first contributed to the great depression by fueling the speculative bubble that led to the stock market crash of 1929. From 1921 to 1929 we see a 61 percent increase in the money supply and yet no increase in currency in circulation. One thus sees then that the expansion was in credit nor currency. One can further see that a substantial cause of this expansion was a rise in the prominence of time deposits in commercial banks which under and because of, the regulation of the federal reserve, had a lesser reserve requirement than the previously more popular demand deposits. Moreover, the expansion was led by an increase in total reserves which was not only caused by federal reserve’s policies, but in fact overpowered the deflationary pressure exerted by reserves outside of the fed's control. We also see that the treasury increased the money supply, via the purchase of silver, by some 211 million dollars. All of this loose credit allowed leveraged speculation that was ultimately put an end to in 1929. Thus the fed led the credit induced boom in the stock market. It is no surprise then that it was key in ending it. The fed, frightened by an unsustainable stock boom as-well the outflow of gold from the united states into Europe, decreased total reserves by $261 million in 1928. On top of this, the

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