The Great Depression

The Great Depression

The great depression was the United States longest recession with the highest unemployment rate in the history of our country. The aftermath of the recession brought many to question as to what caused it and what cured it? In my opinion it was the lending practices of the banks and intervention of the government that brought down the economic climate of that time. Initially the banks started to lend a ton of money (due to low interest rates from the Federal Reserve) to people to invest in the stock market and real estate. As the stock market went to an all-time high, it created a bubble that makes everyday companies seem larger than they were supposed to be. The reaction of the Federal Reserve was increase interest rates to slow down the economy. The effect of this made the stock market collapse and made banks lose money while offsetting the lending ratio 9:1 (lending/reserves) that they loaned at. The collapse of the banks destroyed business from growing due to the lack of lending from the banks. Not only did it destroy businesses but it causes many people to lose their money.

From the catastrophic event, the government enacted the least logical policies (FDR’s New Deal)  to enforce what they thought would promote economic security. Through their efforts, they raised taxes on business owners, promoted unions and made employers pay employees at what the government thought they should be paid. With these regulations and others, the business owners found it hard to make a go at sustaining a business and hiring employees. To add to this they enacted the Smoot Hawley tariff that raised tariff on imported goods making trade decrease and trade wars with countries increase. This resulted to unemployment rates of 20-25 percent and a prolonged depression. While all this was happening the Federal Reserve raised interest rates which resulted in a few dollars chasing goods. So to the average consumer the price of food increased to a point where it was hard to afford getting by.

The end of the Depression only ended during World War Two, when every enabled man was asked to serve in the military. By everyone joining the military the Unemployment rate decreased and the Federal Reserve lowered interest rates to lend to the government for war. This made it accessible for business to receive loans and grow their business. During this period in our history the countries G.D.P. increased and the standard of living increased.

In conclusion the government’s intervention both harmed our economy at the beginning and improved our economy at the end. Personally I believe a free market system will correct itself if the right rules by the government our set into place.

Key Traits To Economic Prosperity

Key Trait Economic Prosperity

In order to have a successful economy in the world there needs to be four traits. These four traits includes having protecting  property rights, having a republic government, having good financial markets while retaining free trade and having freedom of press.

The first trait of economic success is “property rights.” Through having property rights (ownership, patents, land,  etc…) people can reap the fruits of their labors. Unlike countries that limit how much money someone can make, countries with property rights protect the money that everyone makes. By having these property rights in place a country can have incentives for businesses to be created and opportunities to better one’s own economic situation.

The second trait of economic success is having a republic government. By having a republic government under a capitalist system that advocates for property rights, people have the power to influence freedoms that build a business driven society. Through having a business driven society that develops new technology without the government getting involved, new technology is built that creates new jobs and improves the standard of living for everyone.

The third trait of economic success is having good financial markets and free trade. With a free market system, competition clashes to make companies develop a better product at a cheaper price. In doing so, the consumer wins while the companies strive to develop and differentiate their product to turn a profit. With the help of good financial markets that use fractional banking to lend to the companies. The companies can leverage their way into becoming bigger and better at what they do. With the syndication of free trade and conservatively strong financial markets the expansion of an economy is infinite.

The fourth trait of economic success is having the freedom of the press. Without the freedom of the press a countries economy would be illiterate to creativeness and advertising. In a general sense no one would know what’s out there or what to buy. But with the freedom of the press the creation of new ideas and advertising prevails to deliver knowledge to the consumer and increase free trade. It only makes sense that if a country is to strive successfully they would need to have the freedom of the press.

In all if I were to drive people to come to my city/country, I would have to encompass these four traits to make my city/country economically successful.