HI125 Lecture Notes - Lecture 13: Devaluation, Economic Bubble, Underemployment
Document Summary
The power-war system is very fragile of imbalances such as war reparations, debt, and tariffs. Attempts to restore the pre-war system introduced further instability. The great depression was a consequence of global interactions, but the us was central to its unfolding. There were several distinct phases and events that saw the collapse of consumer demand. The failure of traditional policies to limit the depression led to increased state of intervention in the economy (keynes). Us stock market has had a bull run. Capital returning to the us to invest there. Collapse of us outflow to europe (nearly zero by the end of the year) Not just one phenomenon (market crash, banking crisis, deflation) Financial institutions are not strong enough to absorb the loss of business confidence. Layoffs and wage reduction (but not all industries) Fed doesn"t loosen monetary policy following orthodox principles (initially lowers interest rates, but raises them again to defend the dollar)
