The paper “ The Great Depreciation of the 1930s and the Lessons from It” is a forceful variant of the essay on macro & microeconomics. The great depression occurred prior to World War II and it affected worldwide economies. The great depression lasted for almost ten years beginning in the late 1920s and ending in the early 1940s. The origin of the great depression is said to be the United States of America where the stock markets crashed in late 1929 (Romer, 1994). The spread of other countries was very drastic. The effects of the depression were felt in both poor and rich countries.
The depression had both economic and social effects. For instance, many people lost their jobs and the United States of America recorded a high of 25% in unemployment (Christina, 2009). The prices of goods and services dropped, little revenue was collected by tax collectors and the overall individual income dropped. Construction and farming were greatly affected with huge drops in the prices of crops with some places recording a high of 60% reduction in prices. Recovery from the depression was seen from the mid-1930s until the beginning of World War II. Sectors most hit by the depressionThe agricultural and the banking sectors were the most affected.
There was an overproduction of crops, which resulted in the slumping of prices of the produce. This was due to new technologies and farming methods, which were used at the time (Romer, 1994). These were detrimental to countries, which could not add value on these produce, which in most cases was the major foreign exchange earner. As a consequence, the foreign reserves of most countries, which depended on primary produce for foreign exchange earner, dropped drastically and many became bankrupt.
Latin America was one of the victims, which depended on primary produce as a means of foreign exchange (Calomiris, 1993). The banking sector experienced a crisis during this period. This was compounded by bad policies in place, which resulted in reduced cash supply and contracting economies. Some countries such as Germany had large debts from United States of America. During the depression, the debts were recalled by the US banks. This resulted in the collapse of the banking system in German (Snowden, 2009).
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