What Caused The Great Depression?

With most of the financial world talking of the 2008 recession, some forget that but 100 years previous there was one equally, if not more devastating, than the one we have just witnessed. In this article I hope to share with you just some of the things that caused The Great Depression, to see who was at fault for such a disastrous period of history.

        The first and in my opinion most important cause of The Great Depression was the 1929 Stock Market Crash. Fuelled by speculation and the promise of untold riches for any and all, everyone had to have a slice of the insanely high profits being racked up by Wall Street traders, so people began buying left, right and centre and why shouldn't they, World War I was over and wealth was spreading around the country, people were happy. Stock prices rocketed and almost overnight the whole nation had become experts in trading, backed up by the assurance, from economist Irving Fisher, that the economy had reached 'a permanently high plateau'. Proof of this universal expertise, came when Bernard Baruch, 'The Lone Wolf of Wall Street' was having his shoes' shined and one of the shiners gave him a stock market tip. Immediately he went to his broker and told him to sell out, as when shoeshiners are giving stock market tips things have gone too far, he was right. 23rd October 1929, the first waves of panicky selling came and the market plunged, with $10 billion wiped out in but two hours of trading and except for a slight rebound due to a large investment from a group of bankers it kept falling. 29th October 1929, Black Tuesday,  16 million shares were traded, a record not beaten until 1969, 40 years on. People simply wanted out, causing the prices to fall, causing more to want out, causing prices to fall further still, sending the market into somewhat of a bottomless free-fall. Life savings gone in a day. People were broke, spreading dismay and fear across the country. The first sign of the horrors to come.

        The second reason for such a disaster was, similar to the recent recession, was a failure of banks, but unlike the 2008 recession, people lost everything including deposits in their accounts, but as you might expect this wasn't the only negative effect from the failure of the banking system, it also lead to the surviving banks be more apprehensive about leading, somewhat similar to the 2008 recession.

        The final and equally important reason for The Great Depression was the USA's economic policy to reduce imports with high taxes, which in my opinion anyway, is ludicrous. Who will it benefit? Some producers maybe, but the average American? Definitely not! What really needed to happen was to reduce tax on imports, making goods for the average consumer cheaper, leaving them with more money left over to save or spend on other things, rather than making them pay more for 'home grown goods'

The Undercover Economist

First of all, I would like to apologise to those of you who were wanting the next instalment of 'The Undercover Economist' chapter by chapter series. This apology comes because I became so ingrossed in the book that I read it in the next sitting. However, today I am going to review the entire book, and give you my final read or no read verdict.

      The Undercover Economist attempts and succeeds in making the subject of economics accessible to the masses, by explaining rather complex matters in but a couple of chapters. However, when reading The Undercover Economist, I found the first few chapters a bit hard to 'get into' and to be honest, slightly dull and basic, but this might just be me cocky and thinking I know everything. Yet once you get past the basics of supply and demand, you are quickly whisked away into a bubble of easy to understand, acutually difficult economics, without even realising it by using anecdotes left, right and centre to ease concepts into your brain. An example of this is Game Theory, which is in reality a very hard, very large branch of economics, yet Harford is somehow able to feed it to you in such a way that is neither tedious nor boring, but still leaves you wanting to find out more, from what was an impecable introduction of the basics of Game Theory.

      Overall The Undercover Economist is to any budding new economists a must read, explorer many new concepts, which will give you a strong grounding to begin your economics journey.