1 / 20

The Great Depression and the Great Recession

The Great Depression and the Great Recession. Thomas E. Hall Department of Economics Miami University hallte@miamioh.edu. Great Depression 1929-1941. The First Recession (1929-1933) output fell 25 % price level fell 25 % money supply fell 33 % 1929-1932: stock prices fell 80%

keelty
Télécharger la présentation

The Great Depression and the Great Recession

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Great Depression and the Great Recession Thomas E. Hall Department of Economics Miami University hallte@miamioh.edu

  2. Great Depression 1929-1941 • The First Recession (1929-1933) • output fell 25 % • price level fell 25 % • money supply fell 33 % • 1929-1932: stock prices fell 80% • 1928-1933: 45 % of U.S. banks failed • unemployment rate peaked in March 1933 at 25.6%

  3. What Started the 1929-1933 Recession? • Federal Reserve’s tight policy initiated in 1928 in response to: --rising stock prices & brokers’ loans --gold outflow to France

  4. Why did the recession become the Great Depression? • stock market crash (1929) • Smoot Hawley tariff (1930) • Commodity price deflation (1930-1933) • Bank failures (1930-1933) • more Federal Reserve tightening (1931) • income tax increase (1932)

  5. The Second Recession (1937-1938) • Output declined 10.4% • Price level fell 2.8% • Stock prices dropped 55% • Unemployment rate peaked in June 1938 at 20.0 % • No widespread bank failures

  6. Major Causes of Recession • Federal Reserve doubled the required reserve ratio (1936-1937) • social security payroll tax took effect (1937) • Reductions in New Deal spending • Treasury sterilized gold inflow

  7. Jobless Recoveries • Unemployment rates, 1933-1941 (December values) • 1933….21.1% 1938….16.4% • 1934….20.4% 1939….15.2% • 1935….16.4% 1940….10.9% • 1936….12.8% 1941….3.6% • 1937….15.6%

  8. Why? New Deal Programs • Placed upward pressure on wages • Promoted industry cartels • Reduced food output and raised prices • Revenue Acts (1934, 1935, 1936) • Social Security Tax (1937)

  9. 2007-2009 Great Recession • output declined 4.0% • Price level fell 0.2% • Unemployment rate peaked in Oct. 2009 at 10.0% • stock prices declined 40 % • Major cause: $13 trillion decline in wealth focused in housing and stock markets

  10. Great Depression vs Great Recession • Different causes • Different orders of magnitude • Policy responses during the recessions were much different --In particular, the Federal Reserve passively allowed banks to fail in early 1930s, aggressively created bank reserves in 2008-2009

  11. Similarities • Demand side recessions characterized by falling output and prices • Blamed on greedy Wall Street crowd • Followed by “jobless recoveries”

  12. Similar Policy Responses During Recoveries • Regulate • e.g., 1933 Glass-Steagall, 2009 Dodd-Frank • Spend – increase size of public sector relative to private sector • New Deal direct and work relief • 2009 stimulus spending • Tax • 1930s Revenue Acts, SS tax, numerous excise taxes • 2012 Taxpayer Relief Act, cigarettes, Affordable Care Act

  13. Print Money • 1930s: left gold standard, monetized gold inflow • Modern era: quantitative easing

  14. T-bill rate, 1934-1941

  15. T-bill rate, 2006-2013

  16. “Quantitative Easing”, 1930s Version

  17. “Quantitative Easing”, 2000s Version

  18. Real GDP Growth Surged in 1941

  19. In Conclusion • 1929-1933, 1937-1937, & 2007-2009 were serious economic recessions • 1930s were far worse • Government policies during the recessions much different • Government policies during the ensuing expansions similar which helps explain the “jobless recoveries”

More Related