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en:great-depression [2019/03/19 09:51] federico [Herbert Hoover weak Economic Policy] |
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| + | Herbert Hoover was president from 1929 to 1933. His response after the crash of 1929 was weak. He didn't have a systematic plan to support families that were falling into poverty. He just called large industrials to not fire more people and local governments to not reduce spending. | ||
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| + | But when the depression worsened, industrials fired more people and some federal governments defaulted. | ||
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| + | ==== The FED was also wrong ==== | ||
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| + | Many economists thought that the "natural tendency" of the economy was to let inefficient banks and companies fall. The reasoning was that after the crisis, the economy was going to be stronger. They were wrong, and the price was high. | ||
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| + | When banks started to fall, the FED let them fall. People started to take out their money from banks and all the system got weaker. The banking system consisted of a network of smaller and semi-independent banks. When a bank had liquidity issues, it was harder than today to obtain liquidity. | ||
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| + | ==== Hoover is wrong again: Trade War ==== | ||
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| + | To protect the U.S. economy, import tariffs on 20,000 products were raised. Other countries take retaliatory measures and raise tariffs. | ||
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| + | Quickly, a wage of protectionism expanded all over the world. Resource distribution efficiency worsened and international trade collapsed. Countries that had achieved scale efficiencies in some industries, had to transfer resources to less efficient sectors. This reduced global economic efficiency and worsened the Great Depression. | ||
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| + | _____ | ||
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| + | Final Thoughts: The Great Depression had many causes and policies in the United States were some of them. Measures taken before and during the Great Depression exacerbated and prolonged its effects. Millions of people fell into poverty and unemployment. | ||