Title: Economic Reaction Paper the Video “Crash: The Next Great Depression”
TV Movie Plot Summary
“Crash: The Next Great Depression” is a TV Movie released in the year 2008 talking about the economic problems especially the fall of the stock markets that had befallen most countries in the end of 1920 especially the United States of America. After the crash of the stock market in the year 1929, a great number of American citizens lost their jobs, homes and their savings that they had saved in the previous years. However, the president of the US then urged his people to remain patient and self-reliant as he thought the crisis was just a passing incident in the national lives that his government had no ability to resolve.
According to Reader and Capitol, in the year 1932, the then New York governor and aspiring Democratic Party presidential candidate declared that the American government had the ability to make the lives of the Americans better than they were then (67). Upon his nomination as the Democratic Party’s presidential candidate, Roosevelt told the Americans that he had a new deal with them of making their lives better something that he meant.
In his first nine years in office as the president of the United States of America, he initiated programs and policies that aimed at not only adjusting the interest rates and creating short-term working programs but also created a new political coalition that included all races of the US and the left-wing intellectuals of the US. These people had little common interests and were bound together by the powerful belief that an all-inclusive government was not only good for their families but also for the country’s economy and the US nation as a whole. Although the coalition was split over time, most of the programs that bound them together as still in place to date.
As described by Hartmann and Thom, the end years of the 1920’s, a worldwide depression hit a majority of nations with market economies but the great depression became severe to the US where at its end in the year 1933, more than 25 percent of the nation’s workers and more than 37 percent of the country’s nonfarm workers were completely jobless (43). Many of the US citizens starved due to lack of food while others lost their homes and farms and those that were homeless sneaked out of the country aboard freight trains that crossed the nation. Despite the economy of the US beginning to recover in the last bit of the year 1933, most of the recovery took place between the years 1934 to 1937 when another new depression occurred with the US entering the Second World War without a full recovery in the year 1941.
The great depression acted as a defining moment for the US in the 20th century as it transformed the role of the federal government in the US economy. Most people in the US accepted and even called for the expansion of the government roles despite most business resenting to the increased federal government control of their activities. The federal government was seen to take up the responsibility for the elderly people in the country for the creation of the social security services and also gave employment compensation to those who had been involuntarily unemployed.
The great depression was also instrumental in changing the economic thinking in the US as many economists blamed the depression on the basis of inadequate demand and also viewed the depression in the Keynesian point of view that the government had to stabilize the level of demand so that there can be no future depressions in the future. Despite the importance of the great depression in the economic thinking development in the US, it is interesting to note that most of the economists do not agree on what caused it.
The great depression contraction also led to the end of the stock market boom and its subsequent crash in late 1929. However, the collapse of the stock market did not cause the depression nor does it explain the length and depth reached by the extraordinary US contraction. In other nations like France, Netherlands, Britain and other Nordic nations, the depression was not as severe and long as in the US as it had ended in the year 1931. The banking and financial crisis experienced in the US never faced these nations and also they left the Gold standard earlier than the US. For the US the contraction continued for the next four years since 1929 to late 1933 when the GNP was as low as 30.5 percent, consumer prices too at 24.4 percent below and the wholesale prices fell to 30.8 percent.
Hoover’s fiscal policy also increased the decline as in December 1929, Hoover had reduced all the income taxes of 1929 by 1 percent so as to demonstrate his administration’s faith in the economy and due to the continuing budget surpluses. By the year 1930, the surplus had grown into a deficit that grew rapidly as the economy was contracting and by the end of 1931 Hoover had already passed a recommendation on a large increase in taxes so as to balance the economy and this tax increase was approved by the US congress in the year 1932. This led to the rise of personal exceptions to 4 percent from 1.125 percent. With such huge tax increases, there was no promotion towards a recovery during the contraction as a reduction in the household’s disposable income led to households spending reduction that led to a further contraction in the economic activities.
According to Dent and Harry, many economists also argue that the NRA and monetary policies were very crucial in recovering from the great depression (54). There are some economists who argue that Roosevelt’s policies and the new federal regulations also hindered faster recovery from the contraction while other emphasize on the monetary factors. Other economists like Alvin Hansen have come up with some discredited explanations that the reason that led to the slow rate of recovery is that the US had exhausted its investment opportunities. Others like Larry peppers argue that federal fiscal policies dragged on the return of full employment. Also, investment problems retarded the recovery as the old and established industries were not capable of generating sufficient investment while on the other side the newer and less established industries had problems acquiring investment funds as a result of the depressed environment as argued by Michael Bernstein.
Despite the steps that have been taken by the governments since then, the great depression is still capable of happening again but it is unlikely because the Federal Reserve Board is unlikely to watch as the money supply goes below one-third. With the wisdom that has been gained since 1930, it gives the policymakers an understanding to keep the economy out of such depressions again.
Dent, Harry S. The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History. Place of publication not identified: Free Press, 2014. Internet resource.
Hartmann, Thom. The Crash of 2016: The Plot to Destroy America-and What We Can Do to Stop It., 2014. Print.
Reader, Capitol. Summary of the Great Depression Ahead. Cork: Primento Digital, 2013. Internet resource.