1929 Great Depression

On October 1929, thousands of banks happened terrify dropping that share price plummet on the New York stock exchange. This sharply crash shocked all investors. Investors desired to know what’s going on of their stocks. The big crash seems to make shareholders in the depth of despair.

If consider the basic reasons to cause the 1929 financial crisis, here are scholars who famous for their analysis. 1. Christina Romer, chair of the council of Economic Adviser. She talks about the reasons of economic crisis, after stock disaster, a sharp fall in the number of people of consumer durable goods, for the future uncertainty of panic rise, this strike is devastating the economy.

2. Ben Bernanke, a chair of the Federal Reserve. Present a macro research to observe from the international capital system. He thought that the origin of the depression is involuntary of monetary tightening, in special problem is the gold standard, when the financial tsunami comes out, the lower speed of breaking away from gold standard countries will experience more serious monetary tightening, and then leads to hopeless recovery.

3. Milton Friedman and Anna Schwartz, who in 1976 the journal of the “American Monetary History” won the Noble prize. They think the Federal Reserve have four mistakes: First, in 1929 to raise interest rates leads the economy into recession, the stock market crashed. Second, in 1931 to raise interest rates to avoid stacks against the dollar, but have huge damage on Entity banks. Third, at the end of 1932 to raise interest again, and also result in U.S finance into recession once again. In the end, there is no effect of any lender of last resort.
Stock market is just like a zero-sum game, there are people make money and also people lose money.  Profit growth in the name of the stock market does not bring any productivity growth directly. But the stock market is not production activities, it’s productivity distribution activities, essentially by the optimal allocation can achieve productivity growth.

If in understandable languages, the stock price increase too much, it is crazy that all people who want to buy or has abilities to buy have been buying. One point that big players found there won’t have someone to take over their chips, therefore, happen to coincide to rob finally pouring a little liquidity.

The content of the book 1929 big crash, economic strength and political insight appear negative correlation. Agent of rescue operations has never been paying more attention to for a long time, even though this means to interfere with the orderly life and interests of the eyes. Someone want to do immediate interests but advocating do nothing, even if it means serious problems will happen in the future. This aspect, the threat of capitalism which they are facing to is they clearing know the bad situation, and will continue to deteriorate, however indicate that is basic “health”.