ANTECEDENTES Y CAUSAS DE LA GRAN DEPRESIÓN (1929) - BACKGROUND AND CAUSES OF THE GREAT DEPRESSION (1929)

THE GREAT DEPRESSION (1929), A history seems, BUT NO MATCH.

By November 1928, and in fact the U.S. economy for 1929 showed an extraordinary achievement and a great atmosphere of optimism in this era, Americans were interested in a picture that was very attractive, this was the huge surge in stock market for 1929 had attracted about ten million people who had the pleasure to watch your money grow without difficulty or effort, it was something openly speculative, yet the risks seemed justified; also seemed that everyone had gone to borrow money borrowed to buy shares in order to get rich. When the bubble burst on Tuesday, October 29, an avalanche crushed sales rates, there was no bid for anything, only selling in one day was missing the rise of the values that had been the previous year, millions of people had counted their profits on paper and had felt secure for life discovered that they were poor.

Weakness at the Farm
At this point everyone would be interested in knowing what was the cause of this tragedy, of course, and precipitated an immediate cause was the structure in which the credit was organized and is characterized by a speculative fever that gripped the economy, philosophy rapid enrichment had destroyed the trading rules and caution of the banks. The banks were owned by foreign investors of dubious provenance, when the stock market dropped, banks and financial institutions charged with these titles were ruined in a sudden.

what they did not know was that the demand for agricultural products was very different to that of manufactured products, the farmers had to face what is known as an inelastic demand, when increased production were worse than they were before it. As the purchasing power of farmers decreased the quantity demanded of goods that consume so did, in this way, the weakness in the farms was a sign of weakness in the economy.

Weakness in the Industry

The factory also had weaknesses, and that even when production was increasing continuously, employment did not. This was because the technological shift exerted an upward pressure against the trend of the economy, more specifically against the use, on the other hand, as the increased production and employment is impeded, the output per hour / man rose quickly to Although the hours were reduced and the overall cost of living between 1920 and 1929 had fallen by 15%, indicating that the level of profits obtained by the technological advances being inappropriately redistributed, what this most serious situation was that profits were being accumulated, providing an extraordinary concentration of income, which is worsening, is that income does not arrive in sufficient quantities to those who will spend, this is one of the deepest roots of the sudden weakness suffered by the economy.

Low in the investment

When the recession occurred because of the inadequate way in which it took the system, expectations lowered investment, trust and prosperity break ended with a reduction in investment, the effects were reflected in what is known as the effect because, by failing to return the savings to purchase assets due to inadequate investment, the fall in purchases began to spread, thus deepened the recession. Where capital expenditure fell in the early years, it dragged consumer spending and because of the multiplier effect, they did so in an amount greater than the fall in investment.

Solutions to the Crisis
The only solution to the crisis was the emergence of a new deal, first giving a speech to the structure of markets operating inefficiently, government responsibility was agreed, and ending with the philosophy of laissez - faire (letting do), and secondly, there was an important innovation that included the government's perspective towards the regulation of money supply, the new policy was the use of the power of the Federal Reserve System to provide an impetus to the expansion by reducing the rates of interest, thereby encouraging the bank loans in difficult times, and increasing to discourage lending in periods of inflation-prone, the third policy, the most important of all, was the intentional use of the powers of taxation and government spending to to move to a stagnant economy, which will be considered a normal complement of private expenditure, especially in periods of unemployment. This new policy was based largely on the ideas of British economist John Maynard Keynes. This was the starting point of capitalist economies around the world and Keynes was considered one of the lead authors in the salvation of this system.

Heilbroner, Robert L. and Milberg, William. The evolution of economic society. (10. Ed.) Mexico: Prentice Hall.1999.190p.