America's Great Depression

The inflation of the 1920s had caused large asset bubbles to form in the housing and stock markets, causing an artificial rise in wages and prices. After the bubble burst, market prices sought readjustment via a drop in the value of the dollar compared to gold, and a drop in real wages and prices. The pigheadedness of deluded central planners who w

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As more and more producers are bidding for fewer capital goods and resources than they expect there to be, the natural outcome is a rise in the price of the capital goods during the production process. This is the point at which the manipulation is exposed, leading to the simultaneous collapse of several capital investments which suddenly become un

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Only briefly, Friedman and Schwartz mention that the price level had not risen too quickly during the 1920s, and thus conclude that the period was not inflationary and so the causes of the depression could not have been inflationary. But the 1920s witnessed very fast economic growth, which would lead to a drop in prices. There was also heavy moneta

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A precursory understanding of economics will make it clear that price controls are always counterproductive, resulting in surpluses and shortages. The problems faced by the American economy in the 1930s were inextricably linked to the fixing of wages and prices. Wages were set too high, resulting in a very high unemployment rate, reaching 25% at ce

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