Wednesday, November 16, 2016
How could we prevent another crash in the economy?
As shown in history, there are rises and crashes in the economy. I'm looking into what the main cause of these crashes are, specifically in the 30's, and how we could prevent another crash. As we learned, in the 20's there was a peak in the economy. Things were looking great and only looked like they were going to get better. However, when everyone bought what they needed, they no longer needed those things. That caused them to stop buying things like cars, washing machines, and buildings. This made it so the people that earned money from selling these things earned less money, so they didn't buy as much. This led to a domino effect that affected everyone. So to me, the problem seems to be that people cannot stop buying things. People need to keep needing. As long as wealth is distributed, it will be there. If people start to get greedy and hold onto all their money, it will affect others, and things can fall apart. One flaw I see to this is that no matter what, some people will want to hold onto their money. This is just an idea, and by no means am I an expert on the economy, but what do you think?
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We discussed in class the credit system and how most people were buying on credit. At the end of the decade, banks had loaned 8 billion dollars to people that only had 200 million put together. If people had continued to buy things they couldn't afford with money from banks, banks would have eventually gone out of business because they would be giving way more money than they are getting causing them to rely on the Federal Reserve System. I am unsure if the Great Depression could have been avoided because it seems to me that the attitude and spending habits of the 20s were setting themselves up for a big fall.
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