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Rethinking the Great Depression

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Rethinking the Great 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 – PowerPoint PPT presentation

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Title: Rethinking the Great Depression


1
Rethinking 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

2
FDR 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!!

3
1933 Economic Rebound
March to July
Non-durables Production 35
Durables 83
Unemployment -5
  • Gold inflows banks rebound.

4
FDR Economic Policy
  • No particular economics expertise.
  • Change f(academic advisors)
  • The problem of underconsumption/overproduction
    (?)
  • Industrial planning
  • Reform vs. Recovery

5
FDR Economic Policy
  • Banking
  • Relief
  • Jobs
  • TVA
  • AAA
  • NRA

6
1933 Economic Slide
July to November
Non-durables Production -19
Durables -32
Unemployment no change
  • AAA NRA kick in.

7
Back to July 1933
Date
Durables Production July 1935
Manufacturing Production August 1935
Unemployment October 1934
  • Industrial codes price fixing.

8
FDR 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

9
The 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.

10
Anemic 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.

11
Effects 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.

12
AnotherGreat Depression Story
13
The 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.
14
The Great Depression of 1946
15
The 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.
16
Consequences 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?

17
Consequences 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?

18
Rethinking 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
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