With hindsight, it is easy to see the conditions that led to the Great Depression and, consequently, how it might have been prevented. Of course, most people at the time were caught by surprise. There were a few economists who warned about the upcoming troubles, but most were ignored or dismissed.
The major event that led to the Great Depression was the stock market crash of 1929. When the market crashed, many people who invested their entire savings in the market lost everything. Many were borrowing money to invest on speculation. If the Federal Reserve had reduced the monetary supply, fewer people would have been able to buy on margin, and stock prices would not have been so inflated.
Another cause of the Great Depression was the failure of many banks. Today, savings accounts are federally insured up to a certain value. If that had been in place at the time of the Great Depression, fewer people would have lost their entire savings.
Thursday, September 5, 2019
Could the Great Depression been prevented?
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