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Things about the great depression you didn't learn in school
We were pretty much taught that the Great Depression started with the stock market crash of 1929. That is a lie, actually more of a half truth than a downright lie.
It started in 1926. First trade tarifs were increased four times resulting in a virtual blockade of American goods. Next the Federal Reserve drastically increased the prime lending rate while simultaneously decreasing the money available to banks. This resulted in a recession.
Next since goods could not be sold abroad they poured money into farm subsidies to help the ailing farmer. Then with less money available for loans, virtually no overseas sales businesses started failing. A few people, among which was Joe kennedy saw what was coming and got out of the stock market.
Then in the biggest bonehead move of all, the government decided that was a good time to increase taxes, especially on the more affluent people and businesses. Basically they doubled the tax rate and more. The old "Soak the rich" principle. This caused massive layoffs and business failures. With less money available, high taxes and high interest rates the stock market crashed and the country went into a depression that lasted for seven long years. It only recovered after the tarifs were lifted, taxes were decreased and lower interest rates and more available money was pumped back into the system.
There are two points to this disertaion. The current finacial crisis in due in very large part to government policies put into place back during the Carter administration, then given a shot of adrenalin by the clinton Administration and not reined in during the Bush Admininistration. This basically forced banks to make loans to people that stood very small chance of paying them back due to their economic status. These loans were packaged by the lending institutions with the blessings of the government and sold in lots to Fannie Mae and Freddie Mac. They in turn sold them to banks as good investments and to other businesses as diversified holding and eventually permeated all walks of business.
The second point is now we have an incoming president whose plans are to increase taxes and add more regulations to already cash strapped businesses. We keep hearing the term "the worst economic crisis since the great depression". No, it isn't, yet. Right now it is the worst since the Jimmy Carter years when we had a 12% inflation rate and a 21.5% interest rate. It can become as bad as the great depression if these tax and regulation increases are put into effect.
See, you thought history was boring. History is not boring nor is it useless. The saying of "Those who fail to learn from history are doomed to make the same mistakes" is real. We should learn.
Respectfully,
Rett
It started in 1926. First trade tarifs were increased four times resulting in a virtual blockade of American goods. Next the Federal Reserve drastically increased the prime lending rate while simultaneously decreasing the money available to banks. This resulted in a recession.
Next since goods could not be sold abroad they poured money into farm subsidies to help the ailing farmer. Then with less money available for loans, virtually no overseas sales businesses started failing. A few people, among which was Joe kennedy saw what was coming and got out of the stock market.
Then in the biggest bonehead move of all, the government decided that was a good time to increase taxes, especially on the more affluent people and businesses. Basically they doubled the tax rate and more. The old "Soak the rich" principle. This caused massive layoffs and business failures. With less money available, high taxes and high interest rates the stock market crashed and the country went into a depression that lasted for seven long years. It only recovered after the tarifs were lifted, taxes were decreased and lower interest rates and more available money was pumped back into the system.
There are two points to this disertaion. The current finacial crisis in due in very large part to government policies put into place back during the Carter administration, then given a shot of adrenalin by the clinton Administration and not reined in during the Bush Admininistration. This basically forced banks to make loans to people that stood very small chance of paying them back due to their economic status. These loans were packaged by the lending institutions with the blessings of the government and sold in lots to Fannie Mae and Freddie Mac. They in turn sold them to banks as good investments and to other businesses as diversified holding and eventually permeated all walks of business.
The second point is now we have an incoming president whose plans are to increase taxes and add more regulations to already cash strapped businesses. We keep hearing the term "the worst economic crisis since the great depression". No, it isn't, yet. Right now it is the worst since the Jimmy Carter years when we had a 12% inflation rate and a 21.5% interest rate. It can become as bad as the great depression if these tax and regulation increases are put into effect.
See, you thought history was boring. History is not boring nor is it useless. The saying of "Those who fail to learn from history are doomed to make the same mistakes" is real. We should learn.
Respectfully,
Rett