Title: Rethinking the Great Depression
1Rethinking theGreat Depression
The New Deal The Depression of 1937-1938 Anemic
Recovery of 1938-1940 The Effects of WWII on the
Economy
- ECO 473 Money Banking
- Dr. D. Foster
2FDR The New Deal
- Nation-wide bank holiday.
- Cooling off period to regain confidence.
- Re-opened banks could not redeem depositsin gold
nor in gold certificates. - Many big city banks open w/in a week.
- Most banks open w/in a month (90 and 70).
- Established FDIC in June.
- Deposits flowed back into banks, ?R and ?ER.
- Bank crisis is over!!
31933 Economic Rebound
March to July
Non-durables Production 35
Durables 83
Unemployment -5
- Gold inflows banks rebound.
4FDR Economic Policy
- No particular economics expertise.
- Change f(academic advisors)
- The problem of underconsumption/overproduction
(?) - Industrial planning
- Reform vs. Recovery
5FDR Economic Policy
- Banking
- Relief
- Jobs
- TVA
- AAA
- NRA
61933 Economic Slide
July to November
Non-durables Production -19
Durables -32
Unemployment no change
7Back to July 1933
Date
Durables Production July 1935
Manufacturing Production August 1935
Unemployment October 1934
- Industrial codes price fixing.
8FDR The 2nd New Deal
- NRA AAA ruled unconstitutional.
- FDR embarks on a court-packing plan.
- New Federal Reserve structure.
- Social Security passed.
- Labor the Wagner Act.
- Tax plans
9The Depression of 1937-1938
- Ur decreased to 12 by 1937 . . . then, back to
20 - Production rising . . . now falling by 67 (dur.)
- Stock prices rising . . . now down 50
- Downturn worse than 1920-21 1929-30 !!!
- Why?
- FDR continues attacks on business.
- Fed raises reserve requirements.
- Labor laws raise labor costs.
10Anemic Recovery 1938-1940
- By 1940, back to where we were in 1937.
- Ur decreased but still around 15.
- Durable mfg. at 96 of July 1929 level.
- Housing construction reached 1929 levels . . . in
1951 !!
- Why? Regime Uncertainty
- Net Investment -18 billion 1931-1935.
- From 1930-1940, Net Investment -3 bill.
- Contractionary monetary policy.
11Effects of WWII on the Economy
- Ur decreased to lt2 by 1943.
- Govt. spending rises by almost 900.
- Rise in Consumption spending.
- Economic recovery as prescribed by Keynes.
- Were we better off?
- Unemployed ? military.
- Rationing and price controls.
- Increased taxes.
- Increased money supply.
12AnotherGreat Depression Story
13The Great Depression of 1946
- Contraction from 1945 (II) to 1946 (I)
- ?Federal spending 67
- 1945 deficit (3.3 tr.) to 1947 surplus (760 b.)
- ?Defense employment by 11 million.
- Armed forces/Federal jobs/Defense
- ?RGDP about 15
Forecast A return to Great Depression levels of
unemployment.
14The Great Depression of 1946
15The Great Depression of 1946
- What Happened from 1945-1947?
- 5.6 mill. women exited labor force.
- 4 mill. non-mfg. jobs created.
- Real wages ?7.
- Investment Exports growing.
- ?Federal deficits keep interest rates low.
Despite fears, increased reliance on markets and
decreased reliance on government proved effective.
16Consequences of theGreat Depression
- An end to the gold standard.--Increased monetary
destabilization.--Culminated with inflationary
1970s. - Increased Federalism.--Size of federal govt.
still growing.--SL getting 25 from feds. - Growth in the Regulatory State.--What isnt
interstate commerce?--Cap Trade next? - Rise of the Welfare State.--Can SS continue?
17Consequences of theGreat Depression
- An end to the gold standard.--Increased monetary
destabilization.--Culminated with inflationary
1970s. - Increased Federalism.--Size of federal govt.
still growing.--SL getting 25 from feds. - Growth in the Regulatory State.--What isnt
interstate commerce?--Cap Trade next? - Rise of the Welfare State.--Can SS continue?
18Rethinking theGreat Depression
The New Deal The Depression of 1937-1938 Anemic
Recovery of 1938-1940 The Effects of WWII on the
Economy
- ECO 473 Money Banking
- Dr. D. Foster