Great Depression

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Great Depression
Introduction
Modern economists have termed the 1930s Great Depression as an unnecessary misfortune that could have be avoided if President Herbert Hoover had not made a bid to balance the budget during the financial turmoil (Krugman 3). Krugman also mentions other mistakes that resulted in the crisis, including the Federal Reserve’s move to viciously defend the gold standard at the expense of the local economy and the officials’ failure to fund the threated banks and worsened the bank panic between 1930 and 1931 (3). A number of factors have been blamed for the 1929 Great Depression, including the stock market crash, bank failures, purchasing declines, American economic policy with European countries, and drought conditions (Kelly). This paper presents the standpoint that while contemporary economists such as Dornbusch and Fischer argue that the Great Crash could not have led to the Great Depression, Romer (597) maintains that there is an important connection between the stock market crash and a decline in real output between 1929 and 1930, which resulted in the Great Depression.
Contemporary economists are of the idea that the stock market crash was one of the serious contributory factors that resulted in the Great Depression. However, this is perceived that the crash did not effectively cause the United States economy to implode, and arguments are that there were serious weaknesses that predated the crash towards the end of 1920s economy. Historians and economists have observed that a recession was already existing before the crash of the stock market. For instance, the production of industrial goods had already outrun the investment and consumer demand. There were business concerns in the face of increased enthusiasm of the good times, which led to the misjudgment that demand for industrial products would increase. Manufacturers acquired more inventories than th...