Long Term Macroeconomic Changes Of The Great Depression Essay
While the free essays can give you inspiration for writing, they cannot be used 'as is' because they will not meet your assignment's requirements. If you are in a time crunch, then you need a custom written term paper on your subject (long term macroeconomic changes of the great depression)
Here you can hire an independent writer/researcher to custom write you an authentic essay to your specifications that will pass any plagiarism test (e.g. Turnitin). Waste no more time!
The twenties were a time of economic prosperity and hope for North America and some parts of Europe. Countries began to rebuild themselves physically and financially after the war, and as war bonds began to mature, new capital began to stream into the pockets of the individual. Consumption in both the industrial and private sectors began to create an economic boom and production levels soared well above full employment capacity. This influx of money and prosperity made investment in companies a very lucrative business venture because profit margins and stocks dividends were making people all over the world a small fortune. Brokers began to involve any person who had extra money to spend in the world of stocks and bonds, and international trade markets began to develop and flourish. Money was an abundant, fluid entity, and economies were thriving.
During this decade, corporations were given the capital to expand. However, the amount of money that had been invested and continued to be invested in these firms, was far greater than the amount that could be spent on efficient production and development. This disparity led to the overinflation of stock prices, a state where the value of the stocks far outweighed the value of the company. This was a very dangerous level to maintain because if people realized that their stocks could only go down in price, they would sell at the higher price levels and would jeopardize the longevity of these firms. In addition, banks also used stocks as collateral for loans, taking the face value of the stocks as a solid asset. If the market were to rapidly and spontaneously deflate, not only would individual debtors lose their ability to repay loans, but the banks would lose their stability because the collateral held on these loans would become worthless.
In 1929 the worst case scenario happened and the world wide stock market fell into a state of chaos. In the proceeding years banks fell, corporations crumbled and businesses cut back on all aspects of production. The economy was entering a decade of recession that was later called The Great Depression, and its repercussions would be felt across the entire world.
The Great Depression is often characterized by the microeconomic variables involved, as these tend to be more dramatic tales. Implanted in the minds of men and the writings of history are tales of personal struggle and hardship, where individuals fought for social stability caused by the deplorable conditions forced upon the masses. However, it is the long term changes in macroeconomic policy, changes that mark this decade in history as one of the most progressive periods in Europe's economic history, that lay the foundations for future generations of capitalists to flourish. By dealing with the outdated policies of laissez-faire economics and the question of the gold standard, the economic superpowers of Europe, Britain, Germany and France, forge the new standard for European economics after the Great Depression.
Laissez-faire economics were based on the principal that the economy of a country should be left to run by itself without any government interference. Men like Adam Smith and J.S. Mill wrote explicit essays advocating free enterprise and unrestricted capitalism. This method of economic conduct worked well until the private sector was hit with the sudden and drastic onset of the depression. The depression took away the confidence of buyers all over the world and shriveled consumption statistics, leaving individual firms very few options about how to handle the price level, wages and unemployment. Leading ultimately to a downturn in aggregate production, governments were forced to intervene in business affairs to speed recovery along, and changes in government policy had to be made if the country was to survive. The only problems with policy changes were that governments were not sure which policies they should implement, and in the end each country took a different stance to this question based on their individual economic standings in the world.
Closely tied to the economic standings of these countries was the question of what currency standard should be used. The gold standard which was originally set up prior to the first World War to equate all the major economic countries' currencies into a common value, was becoming weakened by constant fluctuations of individual currencies. Since each country is independent in and of itself, the rates of inflation and the rates of production were not always uniform across the countries. If a country was to keep with the standard, major controls would have to be implemented within a country to keep their economy prosperous.
After World War I, Britain was the strongest economic voice in Europe, having per capita income definitively higher than France's or Germany's.1 Having this strong economic base to work from, Britain was able to deal with the impacts of the gold standard on their economy much better than other European countries. From, the start Britain knew their currency was overvalued according to the gold standard and they set about to immediately rectify this problem. After a few failed attempts at working within the system, Britain left the gold standard behind in 1931, devaluing its currency by about one-third2 of its original value. Inflation did occur after the change, however the rate of costs did not increase to the severe extent other states were forced to endure.
In response to earlier demands and pressures to move away from the laissez-faire system of economics, a British citizen by the name of John Keynes began to develop what would be the new economic policy for not only Britain, but the United States as well. His theory stressed the importance of government expenditures and taxation, as he felt they were related to the variables of employment, wages and the price level. In his publication General Theory, Keynes pointed out that the depression severely limited the ability of individual firms to correct any production problems they were having by themselves.3 The decreased demand for goods caused by inflation was commonly followed by firms lowering the prices of their...
MLA Style
. EssayMania.com. Retrieved on 24 May, 2012 from
<http://essaymania.com/158640/long-term-macroeconomic-changes-of-the-great-depression>
More College Papers
Joseph II of Austria essay
If one were to study the roles of the lower classes in a society during the 18th and 19th centuries, one would notice that the concept of utility increases in importance over time. With the economic systems of the world being driven by what a country could produce and subsequently offer for trade,
Journey to Topaz essay
JOURNEY TO TOPAZ
This book, A Journey to Topaz, involves an eleven year old girl named Yuki Chan who lives in California. Up until this point she was a perfectly happy girl and had many friends. But then, one day, Japan bombed America and all of the Japanese were taken to camps, including Yuki.
Pope Julius II essay
POPE JULIUS II
Pope Julius II was a powerful ruler and also the greatest art patron among the popes. His reign is considered one of the most brilliant in the Renaissance period. He was born Giuliano della Rovere, in Albisola, Italy in 1443. He became a Franciscan priest in 1468. After his uncle