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Response to Questions About the Great Depression

from Bradford DeLong (delong@econ.berkeley.edu)
The chief causes of the Great Depression appear to have been (a) bad luck and (b) a strong attachment to the gold standard, a system of organizing international finance that proved truly disastrous in the 1930s. The stock market seems to have played little role in the Great Depression--although it did start it off with a bang--and to have fluctuated because it always fluctuates.

Any of a number of things could have brought the economy out of the Great Derpession much faster: devaluing the currency, expanding the money supply, or increasing the federal deficit. I don't think that another Great Depression is at all likely: we had one, and the Federal Reserve has spent a lot of time studying it. If it makes big mistakes, they will be original ones--not the same ones that led to the Great Depression

(posted 8705 days ago)

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