To What Extent Did the Causes of the Great Depression Originate within the US - Essay Example

THE BRITISH AND GLOBAL ECONOMY STUDENT’S NAME: INSTITUION: INSTRUCTOR’S NAME: DATE: To what extent did the causes of the Great Depression originate within the UnitedStates of America? The great depression is one of the impacts that affected countries globally in the year 1930s and afterwards. The depression affected the United States of America since, by that time, the economic status of the nation was high. The causes of depression are still considered in today’s strive to achieve economic balance in every country. The great depression was fatal, and it caused a downfall in economies globally. When there is an economic downfall, nations will suffer from a rise in the economy such that there are problems with the circulation of money and the profits gained from businesses (Termin, 1993). Countries are striving to recover from the depression and have developed various economic mechanisms that will ensure they recover and regain their economic stability. United States of America were later discovered to be the center of the great depression in the sense that most cases originated from this country. The economic depression had a great impact on major economic countries and from the statistics, it shows that the industrial production was the cause of the economic downturn (Arwin, 1995). United States were the leading when it came to a downturn in industrial production whereby they experienced a downfall in the industrial sector such that it affected the other countries as well. There was an early downfall in construction in the United States, which weakened their economy, there was a decline in the economic output in America from the economic depression affected the consumer goods and had a lesser impact on investment goods. This was seen as a great impact because people suffered in terms of inability to satisfy their needs. In the year 1929, there was a sharp decline in the American economy, which was later discovered to have been caused by the downturn in domestic consumption. It is clear that the cause of thegreatdepression originated from America as for the fact that all the issues relating to the great depression are inclined towards the American nation. There was a decline in the domestic spending, which led to an overall decline in the consumer goods consumption. Therefore, it is obvious that the country was the leading when it came to the impacts of the great depression. This was further explained by the decline in GNP as a result of economic downfall in the United States. Although the gold standard is accused of the deflation during the late 1920s, the Gold standard performed two important functions. In Britain, the gold standard formed the basis of the currency and acted as a regulator of currency volume. During the First World War, Cash in many countries was limited by a gold reserve held by the central bank. This helped in the total currency of these countries being regulated by gold reserves. The second importance is that the gold standard made it possible to stabilize exchange rates in the countries that used the gold standard program. The crash in the stock market was also evidence on the origin of the great depression in the American economy. From the statistics it is discovered that there was a crash in the stock market, which rendered the nation into a weak economy (Termine, 1993). The stock market was the most contributor of economic development and the crash was stimulated by factors such as the decline in consumer good and the decline in the rate of consumption by the Americans. When there is less dependence on locally produced goods by the citizens, it has an impact on the economy because it will reduce the rates of production and increase over-dependence on imports which will stagnate the growth of domestic industries (Toniolo, 1998). The manner in which golden delegation presents the causes of the breakdown of the golden standard seems different. Statistics of the past years after the start of the great depression shows that there was a horrific situation in America. The horrific situation was catalyzed by the fall of the economy, lackof employment and the weak monetary policies. The domestic industries faced a downfall, and everything became expensive such that there was a high standard of living with no employment. Taxes also raised and the overall economic performance was facing challenges (Romer, 1993). The impact of the First World War has been rated the most impact on the occurrence of depression. From the records, America participated in the First World War, and they used most of the country resources to manufacture weapons. Therefore, the economic situation declined for the fact that all the resources that were used to stabilize the economy were diverted to the First World War. The trading patterns of most countries were altered during the war; this, therefore, resulted in the introduction of National boundaries that affected the trade (Williamson, 1985). Most nations sold their assets while the United States depended on leans from other countries such as France and Britain. Also, the restrictions that were imposed on the American economy in early 1920s became other sources for the downfall in their economy. The restrictions were based on the gold reserves that the United States had acquired and for the nation wanted to preserve the economy by introducing the monetary policies,they therefore had to dissolve those polices when the First World War began. While the early downturn in construction in one way in which the onset of the depression in the United States differed from other countries, more important differences involved the immediate severity of the great depression in the United States and the peculiar composition of the decline in American output (Galbraith, 2009). The rates of decline in industrial production in the four major countries that are known to have a stable economy are different with United rated the highest (Smith, 1995). Therefore, it is evident that the causes of the Great depression that affected countries globally originated from America. The expansionary and contractionary mechanisms that were imposed by the country in order to recover from the great economic shock also portray some impacts that affected the nation (Romer, 1995). In the process of recovering the nations that wereaffected turned to the pricing policy and the exchange rates. From the economic knowledge, it is obvious that the exchange rates affects the foreign currencies, and hence countries will either benefit of the will not benefit from the foreign trades. The pricing mechanism is also a tool that will control the domestic markets and enable the economy to flourish. In his article, Temin argues that the transmission of the great depression provided different lessons such as how to avoid macroeconomic shocks and measures to take when it hits. When the bank of England raised the Bank rates after, it was for the purpose of fighting inflation, not to harm the bank customers (Temin, 2002). Articles that explain the economic downturn of the great nations depict that the origin of all financial crises focuses on the American economy. There is more evidence on the economic policies of other nations on over-dependence on America for foreign trading. These policies are intended to protect their domestic production industries by restricting imports and working towards developing their economies (Romer, 1993). Every country is fighting back for the recovery of their economy's stability and hence the monetary and fiscal policies are intended to reduce the rate of economic instability. The countries are sensitizing on more developments, especially the developed countries; they are struggling to be the leading in terms of economic development. The developing countries that were affected, on the other hand, are struggling to encourage domestic production by providing incentives for development of enterprises and hence the creation of employment which will lower the standards of living. Reflection on the development of study skills in answering the above question Development of the study was done through research on the articles that have the evidence on the most contributing countries towards the great depression. I, therefore, had to analyze the economic policies and the factors that lead to economic depression. These factors helped in concluding with the fact that there was an economic downfall in most of the countries which were as a result of the economic downfall in the four major developed nations. The development process was strengthened by the facts from economics class I have attended (Romer,1993). The facts have helped in my study skills through enabling me to draw judgments on the causes of economic depression. I had to visit the library look for sources that depicts the contents of economic depression. Perhaps having an insight on the impacts of the First World War helped in the study since one of the major impacts was the downfall in the economies of most nations. Also, the nations that participated in the war were greatly affected because they diverted all their resources into developing weapons that were used in the war. Internet sources were also one of the sources I used in searching for the content to present on the question above. The study and the knowledge acquired helped me in answering the questions. Some of the factors that show a great downfall in economy are the rising standards of living and from the analysis of the American economy, we find that the standard of living rose as soon as they experienced the great depression (Termine, 1993). There were also employment factors whereby there were no jobs and the payment rates were low; this was another evidence of thefinancial crisis. The withdrawn trade terms and trading with other big nations also portray an impact of a poor economic situation. The recessions that Americans went through had an impact on immigrants because they experience lower rates of payments as before. Throughout the study skills I had to rely on the best resources, especially articles and history books that depict the economic situations of different countries. The articles provide in class also helped in gathering the facts that helped in drawing a conclusion to the question. Answering the question involved going through the analysis from various sources and reached specific evidence. The challenges encountered in answering the questions were the different sources that have the same facts, and hence I had to rely on a convenient source. Also visiting the library was a challenge because I had to research from books and especially history books. This required a lot of time because I had to look for specific books that had the history of the economic analysis before the First World War and aftermath. I had to develop a schedule that guided me in finding the answers. I also managed to inquire from the economics department on the impacts of economic depression on countries and the factors to be considered for the purpose of recovering back the economy. Reference Galbraith, J.K. 2009 The Great Crash, 1929, London: Penguin. Romer, C. 1993, ‘The Nation in Depression’, Journal of Economic Perspectives, 7(2):19-39 Termin, P. 1993, ‘Transmission of the Great Depression’, Journal of Economic Perspectives, 7(2):87-102 Irwin, D. 1995 ‘The GATT in Historical Perspective’, The American Economic Review 85(2):323-8 Smith, D. 1995Japan since 1945: the rise of an economic superpower, Basingstoke,: Macmillan. Temin, P 2002 'The Golden Age of European growth reconsidered', European Review of EconomicHistory,6:3-22 Toniolo, G. 1998 ‘Europe’s golden age, 1950-1973: speculations from a long-run perspective’, EconomicHistoryReview,51(2):252-267 Williamson, J. 1985 ‘On the System in Bretton Woods’, American Economic Review; 75(2):74- 9 Read More