What Caused the Great Depression? (Classroom Edition)

Another video that is "exactly what it says on the tin". We've been talking about the Great Depression in so many videos, covering parts here and there, that I thought it deserved its own video.

This is an appropriate version for the classroom of a previous video.

Video credits to Shane Killian YouTube channel

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What Caused the Great Depression? (Classroom Edition)

Comments 48

  1. The WPA is a bad thing right? yeah…. isn't it like forced government labor?

    Shane could you help please?

  2. Just a few points to make is that even if you could prove massive credit expansion in the 1920s, which you don't because you provide no evidence, you failed to show any causa relationship between credit expansion and an economic boom. You fail to acknowledge that during the entirety of the 1920s the US ran a budget surplus, which by definition means they built up a private sector deficit which eventually got too big and this lead to a series of events that lead to the depression.

    Another point is that there was no massive unemployment after the new deal, that's simply a fact according to every statistic that exists on the time period. Unemployment drastically decreased after the new deal because it created more government jobs

    Also the 1920-21 recession was not hands off. The government cut interest rates on top of many other things to stop the recession and you ignore debt deflation from your analysis all together which is odd considering it's the most important part of identifying a crisis

    There are more problems but I haven't the time right now to explain them all

  3. I may make a whole response to this video just because you don't even give the correct explanation many Austrians do of the Great Depression

  4. No, because the problem then was too much money.

    The Fed made too much money in the 20s, then when the inflation started they panicked and hit the brakes, going too far the other way. In the 2000s, the Fed just kept increasing the money supply because they thought that, since the problem of the GD was too little money, then the more money, the better.

    But the money supply needs to be at market equilibrium. And the Fed is completely unequipped to do that.

  5. One thing I am confused about. Bernanke and co were increasing the money supply in 2010 correct? Isn't that what you would have advocated?

  6. Didn't help. Like I said, we didn't get out of it until after the war, when government massively CUT spending and taxes.

  7. "… from August 1937 to March 1938 the stock market fell by 50%. Finally during world war 2, …" Oops, what about Keynes "General Theory" of 1936 which was adopted by FDR on April 14, 1938

  8. so the lesson should be, regulate regulate regulate. It's happening again with gasoline prices, a few high execs are gambling with crude oil packages gambling with the pricing of the future and the availability of crude oil, that's why the prices of gas keep rising. Bad deals don't affect just the players, it affects the entire nation now. And reserve spending during recessions is the only cure in the current system. Until they finally disolve the need for a reserve with a better idea.

  9. Actually not quite that simple. If the government hadn't been bought by the councel of bankers to create the federal reserve, then the crash wouldn't have happened nor the continuous cycle of crashes since. in the 1980's congress deregulated banks by removing FHLB Act which kept these banks from performing risky sales with housing loans, which then led to the 2008 housing crisis because of a few bank execs and Standard and Poore selling unrealisticly bloated loans ins packages overseas.

  10. You mean all of those things which have had detrimental effects on society, that make it difficult for workers to compete, and which levy costs onto smaller competition that they can't shoulder, thus strengthening monopoly power?

    You're right, our government has indulged in corporatism for far too long; which is precisely why the government should not be allowed to legislate privileges to whichever company has the most lobbying power. I, for one, support taking that power away from the state.

  11. @Ringvireot How do you come to that conclusion? And where do you get 0.7% from?

  12. @doublestrokeroll You are the one indulging in name-calling and hatred. This is YOU losing the debate.

  13. So in other words if the government would have stayed out of economics the great depression would have been avoided.. let that be a lesson to us all.

  14. @professornuclearbomb Because they charge modest fees for demand deposits, and time deposits they can loan out as long as they get the money back by the time the time deposit matures.

  15. @professornuclearbomb Full Reserve Banking just means that the bank has enough reserves to cover all deposits.

  16. @professornuclearbomb You need to end the Fed and start enforcing laws against fraud on the banks.

  17. @shanedk Explain FRB to me please. I heard of it yet I don't know how it works. Then the question is how to we push banking in that direction.

  18. @shanedk The central bank keeps the whole banking system up. Remove the lender of last resort and it will not end well as a dip in the economy will lead to runs on the bank with people losing their life savings. No matter what reserve ratio you are using, there is NO safe fractional reserve bank

  19. @professornuclearbomb That's the CENTRAL bank that does that. That's what needs to go.

  20. @shanedk Yet they inflate the money supply and cause the business cycle. Just because I don't do business with them, doesn't mean I am not affected by their actions.

  21. @Corporatism It should be said that fractional reserve doesn't create inflation on its own; it multiplies the effect of inflation. You still need something like a central bank to jump start the process.

  22. @vspqbd One big reason, yes. Refusing to obey Congress's order to go to war with Canada and seek a compromise instead is another.

  23. @professornuclearbomb This coming from the guy who supports a government regulated 0% interest rate even though history provides numerous examples of what happens when interest rates are held too low buy fiat. I'm not sure what you think the Scientific Method is.

  24. @professornuclearbomb What vspqbd, plus the S&L crisis, the high unemployment, inflation, and interest rates of the '70s, and the fall of Communism in the Soviet Union.

  25. @professornuclearbomb How come the Austrian school is the one that has passed the most testable predictions?

  26. @professornuclearbomb I know all about the Free Banking Era. You apparently don't, or you wouldn't have tried to laughably bring it up in response to YOUR point!

  27. @shanedk I don't trust the Austrian School of economics because they don't use the scientific method. I understand the Scientific Method contains the Induction Fallacy, but your other videos support the Method.

  28. @interstate317 That isn't true. Throughout the '30s Treasury bonds had negative nominal yields. People were hoarding, not saving, which happens in any such deflationary period.

  29. @professornuclearbomb The reason why nobody was investing during the Depression was because Fed policy pushed interest rates down to NEGATIVE numbers!!!

  30. @johnrainrules Inflation was accelerating because the Treasury was part of the banking system. Polk removed that in the 1840s and that was when it stopped.

  31. @professornuclearbomb Here's a good video on that: Economic Cycles Before the Fed: /watch?v=TxcjT8T3EGU

  32. @professornuclearbomb NO! Inflation comes from expansion of the money supply–which can ONLY be done by a central monetary authority, usually a central bank.

    Fractional reserve banking formally existed in this country with the National Banking Act of 1862. Before then, it was a form of fraud, but none of the states every did anything about it. To "fix" the problem, instead of making the states act, the feds just made it legal.

  33. @johnrainrules Also you can pretend a central bank using an inflationary policy for 20+ years had nothing to do with a credit cycle unwinding, or you can pretend banks somehow "over-speculated" in 6 months since the end of the Second Bank and somehow all of those bad loans came due in less than a year and were all bad.

    Which is more likely 20+ years of bad policy causing a crisis, or somehow bad loans made and due in less than 6 months caused the crisis.

  34. @professornuclearbomb Lending by the Second Bank of the U.S.

    You can keep using the term "Wild Cat Banking" like it means anything, but your Second Bank of the United States created massive inflation for 20 years that ended the day banks refused to take anything but specie which is the exact opposite of over-speculation.

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