Yes indeed, as do virtually all scholarly approaches to determine the cause of the world wide depression. The Hawley-Smoot Tariff Act of 1930 coupled with an increase in marginal tax rates caused America's depression, which rippled through out the word.
Yes indeed, as do virtually all scholarly approaches to determine the cause of the world wide depression. The Hawley-Smoot Tariff Act of 1930 coupled with an increase in marginal tax rates caused America’s depression, which rippled through out the word.
Not according to Milton Friedman. From 1918 to 1926 the FED increased the money supply by a factor of 3. They made a decision in 1926 to reduce the money supply by 1/3 by buying the bonds banks needed as reserves to make a loan -— and didn’t tell anyone. They continued to buy and destroy these bonds until 1936. So while the government was trying their best to “prime the pump”, the FED was sucking off all of the prime and then some.
So, at the wholesale level, farmers borrowed money for tractors in the late 20s, borrowed money for seed and fuel in the spring, and sold the harvest in the fall, and paid off their loans. Then one year they went to get their spring loan to plant, and the bank had no money to lend. And thus the people who sold seed and tractor fuel had to reduce staff. The farms that were left had high prices but were limited to low volume, so the transportation sector lost capacity and reduced staff. The ripples continued.
At the retail level, clothing stores borrowed money, bought clothing, sold it, paid off their notes, and asked for a new loan for the next set of clothing. The bank had no money to lend. And thus the people who made the clothing reduced staff, and the folks who made the cloth, and the folks that spun the cotton into thread, and the farmers who raised the cotton ... had no product to sell.
This time, the FED is opening the spigots, creating $45 billion in one week. We will have a different version of the above problem -— inflation when all that money comes home to roost.