138

To expand on Schwern's answer somewhat, using leverage as a trader works more or less like this: Scenario 1: you have $1k of play money and use it to buy stocks. The market goes up 10%. You sell. You now have $1.1k. Net gain: $100, minus some transaction fees. Scenario 2: you use $1k as collateral for a loan to bring your play money to $10k. The stocks go ...


83

If they did, it would be because of the practice of buying on margin, a form of loan from your broker where you use the stocks themselves as collateral. This allows you to buy more stock than you have cash on hand. If the price goes up, you get even richer and sell some of the stock to pay off the loan. If the price of the stock falls, you'll find yourself ...


35

Keynes suggested it during the Great Depression. It's not exactly the same, but I think what you've heard was a mutation after so many years. In the depths of the great depression, Keynes suggested that "the Government should have people dig up holes and then fill them up". What at first seems like a wild idea, may have had some logic behind it. Keynes ...


24

Brokers went bust due to an aspect of investing that isn't often covered by mainstream media: the margin call. When you buy stocks on margin, meaning you're borrowing the money to buy a lot of the stocks, who puts up the rest of the money? The broker. Buy $10k worth of stock at the 15% margin allowable in the 1920's, and you only paid $1500. So if it goes ...


24

According to my quick reading of the Life and death during the Great Depression by José A. Tapia Granadosa and Ana V. Diez Roux, the only noticeable increase of mortality was suicide, with a noticeable decline of mortality in every other category. It's interesting that this paper was written in 2009, before the (shall we say) sensationalist Russian claim of ...


22

Health researchers collected data on causes of death in 114 U.S. cities during the Great Depression. Their findings confirm the impressions of many observers in the 1930s, mortality did not increase during the Great Depression: They include a table that shows trends in death rates per 100,000 population. Starvation does not appear on the list, nor does it ...


18

FDR was not the first president to come to power during a financial "panic" (aka: Recession or Depression). However, he was the first one after the advent of modern economics, and he was listening to the new economists. Economically, banning private holding of gold had the effect of propping up the US currency. Normally in hard times (and I think 1933 ...


10

FDR used it as part of a plan to fight the Great Depression and get the US economy moving again. FDR needed to expand the money supply, more on why this would fight the depression below, he needed to print more money. But the US was on the Gold Standard; you couldn't just print more money, every dollar had to be backed by gold. So to fight deflation the US ...


10

It is a politically charged issue and it really depends on the economic and political side of the fence you're on (T.E.D gave the Keynesian view). As someone who's libertarian on most financial/economic policies, I see it as detrimental and that we're still feeling the negative effects of it today. As Alan Greenspan put it in Gold and Economic Freedom... ...


9

Did the Stock Market Crash of 1929 effectively cause the Great Depression? No. The stock market crash was most likely a serious contributory factor in the onset of the Great Depression. However, it did not "effectively cause" the economy to implode - there were serious pre-existing weaknesses in the late 1920s economy. In fact a recession was already ...


9

Wow - it would take me a long time to find the appropriate sources to answer this the way I want to. I also feel obliged to admit that I have an opinion on this topic, and I hope that @Samuel Russell or someone from the other side of the aisle will contribute to counterbalance me. @John Craven is correct that the great depression was a complex, global ...


7

I think you are forgetting that the inflation rate during WWI was staggering. The consumer price index at the end of the war was extremely high, and the deflation that you are referring to can be seen as more of a adjustment in pricing back toward pre-war levels. In fact the CPI was relatively flat through the 20s as a 10 year moving average: In 1928, ...


7

Other than coffee and tobacco, the main "cash crop" for Cuba (and most other Caribbean islands) was sugar, in the 18th century. This was originally used to make rum for the so-called "triangle trade." (Sugar from the Caribbean became rum in New England or Europe, traded to Africans for slaves, taken back to the Caribbean). The industrial revolution helped ...


6

I am not a Marxist Political Economist. I am a Marxist labour historian. When I relate to economic history, I can only really talk about the way in which capitalism actually functions (with reference to the truth systems of academia) from a "firm level" or "proletarian" perspective. This question would require a Marxist political economist to answer it in ...


6

There was a period in Cuba "the sugar revolution" as it is called in Franklin W. Knight's review. Sugar industry includes large set of products, and between 1750-1850 there was a big explosion of demand for sugar. In the beginning of that period aristocracy used up most of the sugar, later in mid 19th century and especially somewhat later even the common ...


6

Yes, but not enough to really become a significant movement. If you quadruple a miniscule number, you still have a really small number. In the pantheon of radical leftist movements in the USA, Communism was never really a big player, and the entire revolutionary left was past its prime in the US before Communism became a world player in the wake of the ...


4

The United States did not experience famine conditions during the Great Depression. Consider that a major economic problem during the Depression was that there was too much food. This "excess" supply made food too cheap, which bit into farmers' profits. To address the "problem" of overproduction, the government paid farmers not to plant crops: The ...


4

The short answer is that no, Roosevelt did not lift the USA out of the Great Depression with the New Deal. The Great Depression was a world-wide phenomenon, and was not going to just go away because one government decided to do a bunch of things, however helpful those things were. The economy did begin to pick back up in the mid-30s, but it looked like it ...


4

Short answer: the destruction and deprivation of World War I. In these circumstances, a decisive, confident leader with a quick and radical solution has much more chances for popular support.


4

Because in 1928 macroeconomics hadn't been invented; until Keynes, people had odd ideas about money supply, inflation, and economic growth. Both of the other answers point to the fed's fear of liquidity. If you kill liquidity, then you kill speculation and all is well. Mundell-Tobin theory suggested that raising interest rates would raise the velocity of ...


4

Another interesting and great question!!! Social Realism. While the Roosevelt New Deal Workers Progress Administration, WPA did not mandate realism or non-realism art. It was about employing artists during the Great depression. Many Artists had sympathies which leaned further to the left than capitalism. What the Roosevelt Administration wanted was art ...


3

The New Deal of the 1930s created a social safety net. This came in America several decades behind European countries, which had started in the late 19th century. One feature of this was wealth protection measures such as Social Security, or old age pensions for people above the age of 65, and the Federal Deposit Insurance Corporation (FDIC) to protect ...


3

Two points: First, if you look closely at the numbers, you see a big rise in the death rate from heart disease and a smaller rise in the death rate from cancer during that period. It's not obvious that either would be much affected by malnutrition. (If anything, given how heart disease is driven by obeasity, the opposite may be true.) If you subtract those ...


3

I discussed this exact action in a fair bit of detail in my answer to Gold Confiscation Act of 1933 . You may want to go check that out. To bring that answer full circle, taking the USA off the Gold Standard wasn't the only economic system change the US government made at that time. The Gold Confiscation Act had the effect of propping up the money supply. ...


3

This article seems to be an unbiased analysis of Herbert Hoover's reaction to the Crash of 1929. It paints him as a relative activist economically, by the standards of the day, but both over-hyped during the election of 1928 and overwhelmed by the sheer scale of the collapse that was occurring. It is worth remembering that he began construction of the ...


3

Percent of people living below a poverty measurement comparable to the World Bank measurement represented by $1.25/day: 50% Some two decades ago, historian Arthur M. Schlesinger Jr. lamented: "I don't know what is to be done to persuade people that the Great Depression took place. So far as I can tell, more and more Americans are coming to believe that it ...


2

I am writing as the author of "A Modern Approach to Graham and Dodd Investing. Published in 2004, the book discussed the 1929 crash and predicted another one (which occurred in 2008-2009). It also provided a road map of how "other events" caused the fallout from the 1929 crash to turn into the Great Depression, and why the absence of such events have (so far)...


2

** Question: ** I have read in a number of Roosevelt's biographies that as Governor of New York, Roosevelt was not so aware of how economics works. I think that this is accurate. FDR did not have a modern nor a contemporary understanding of how the economy worked either as Governor of New York or for much of the period marked by the "New Deal". This can ...


2

Boondoggle, the term in which I was looking for, came to me today when the economist Max Keiser used it on the political panel show 'Have I got News for You'. He used it in reference to the planned HS2 (high speed rail) linking London with Birmingham in the United Kingdom. On further research I found that the word was first used in 1935 in a New York Times ...


2

It's very hard to recommend a book for an experienced scholar in his own field, because he's likely to have already read it. I have one suggestion, because it's quite obscure. I Was A Stranger by John Hackett was published in 1977, and reprinted in a limited edition by Slightly Foxed Ltd more recently. It is the story of how an Australian-born British Army ...


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