CRASH 2008-09 -- first wave

Great Depression, causes and parallels--jk

Quotes on our banking system: a forgotten struggle
U.S. Monetary Supply--the root of the Crash
Great Depression, causes and parallels--jk
The Second Great Depression--why-jk
Great Depression and the New Deal
Argentina's Collapse
Asian Crash 97--model for U.S. Crash
NEOLIBERALISM, the globalizers
Robber Barons
Fed Stats--the deception
More Debt no FIx--jk
Financialization and the Bubble/CRASH
Class nature of the CRASH--jk
Obama and the Second Great Depression--jk
Nobel Lauret on the Crash--Stiglitz
Second deed solution--jk
Three Crashes--Models
Financial Crisis, a socialist perspective
Fairness Doctrine overturned yields corporate media
Funny Money Solution--more fed debt
Why We Need Regulation of the Market Place
10 to 1, the Credit Expansion
Fed debt--the debt game
WaMu Give Away by Feds
Offshoring and the Auto Industry
Economic summit November 15th
Figures on the CRASH
Pod Cast of CRASH plus much more

The primary cause of both depressions was the expansion of credit

The past is strikingly similar to our press quagmire


Notes on the Great Depression (from 6 books by jk)


The events of the 1920s parallels those from Nixon to Bush

  1. Consolidation yields corporate control of media, which influenced beliefs.  The media created a faith in capitalism, big business, banking, and a belief that the Republican Party was the custodian of prosperity.  The media attacked progressivism, unions, and socialism and also created a patriotic association with capitalism. Opponents were labeled as “un-American”.
  2.  Attack on labor movement.  The national press pictured unions as violent, radical, dominated by foreigners and Bolsheviks, antagonistic to the capitalist ideal, inherently un-American, and, not least, expensive.” (Watkins 45)   From the municipal level to the federal level, the judicial system had cooperated by using injunctions to stifle union organizing, strikes, picketing, boycotts, and other expressions of union support with devastating effectiveness.”  AFL membership went from 5.1 million in 1920 to 3.6 in 1923. (Watkins 45-6).               
  3. A succession of Republican Presidents (Harding 1920, Coolidge 1924, 1928 Hoover) led to the death of progressivism and reform politics.  This entailed that there was minimal safety nets in place such as unemployment and pensions which place funds in the hands of the masses during downturns. 
  4. Massive Immigration cheapens labor. Flooding of the labor market:  immigration between 1920 and 1924:  600,000 from southern Europe, 150,000 Poles, 50,000 Russians, 150,000 from Central and Eastern Europe, and 175,000 Mexican[1]—Watkins 28.
  5. Decline of unions:  “The blame for at least some of the widening gap between wages and productivity during the twenties could be laid to the decline in unionism…. The triumph of industrial Republicanism after the end of the war had nearly killed the labor movement.” (Watkins 45). Declining purchasing power of workers entails that the largest body of consumers bought less. 
  6. Increasing profits from the gains in productivity flow to the wealthiest.  Productivity per worker in manufacturing rise between 1919 and 1929 43%, while wages decreased due to inflation.  The flow of wealth to the top entailed that instead of buying durable goods these funds were consumed in speculation.  Expansion in manufacturing responds to demand.  Economic expansion to a large extent depends up an increase in the buy power of the masses.  It expanded as their debt grew, until fall wages brought the collapse. 
  7. Mergers:  from 1918 to 1928 there were 1,200 mergers that swallowed up some 6,000 previous independent companies.  In 1929 200 corporations controlled over half of all U.S. manufacturing.  Less competition meant price fixing, and federal taxes took very little of the higher profits.  “As a result, most of the personal wealth in the country resided in the pockets, bank accounts, and stock portfolios of a tiny percentage of the population.  But goods had been produced for the millions, not for the thousands, and the millions simply could not afford them. The surge of installment buying after the war had obscured the essential weakness in the system for a time.” (Watkins 46).    
  8. The tradition of free enterprise entailed a lack of banking regulations.  From 1922 until 1929 an average of 691 banks failed per year.  In 1925 the Louisiana Bank Commissioner wrote of failures in his state:  “Gross and evil management, poor management, promotion of speculative enterprises, loans without security, too large loans, loans to companies in which officers were interested, were the major causes of bank failures.” (Watkins 47).  Banks had become willing partners in the stock market extravaganza.
  9. The influence of banking.  Following the formation of the Federal Reserve System in 1913 (which is not part of the U.S. government), since they loaned the government money for its debt, their influence grew, which entailed a lack of supervision. The Federal Reserve expanded credit which resulted in various speculative bubbles including the stock market, farming, and real estate.
  10.  Farming bubble.  High prices on wheat from 91 cents in 1910 to $2 a bushel in 1920 (based on price fixing by grain companies).  Farm debt went from $3.2 billion in 1910 to $8.4 in 1920 for which interest payments were $574 million—Watkins 44.  Farming was the economy’s second largest sector back then.  Falling price entailed increasing production which brought about the collapse of farming.  This had a ripple effect. 
  11.  Florida and California real estate bubbles and collapse.  Total value of LA property went from $28 from in 1919 to $200 billion in 1923.  In 1924 banks started pulling their loans.  Florida took off in 1925.  Miami had by the end of 1925 2,000 real estate offices employing 25,000 agents.  It fell in the fall of 1926.   
  12.  Stock Market bubble affected retail purchasing, which eventually lead to sluggish growth in GNP. 
  13.  Falling production lowers investors’ confidence and bursts stock-market bubble.  “During the two months before the stock-market crash, production declined at an annual rate of 20 percent, wholesale prices at a rate of 7.5 percent, and personal income at a rate of 5 percent—the first major symptoms of the virulence to come.” (Watkins 47).
  14.  The U.S. was the world’s leading creditor nation (replacing Great Britain). U.S. postwar-years foreign investments were $15.7 billion.  The U.S. also had a positive balance of trade with Europe.  With the growth in stock market speculation in the late 20s, Europe became a less attractive investment, which brought about economic stagnation in Europe.  Europeans thus had fewer funds to buy American goods. This reduced U.S. manufacturing. 
  15.  Tightening of credit to Europe and their debt payments.  During WW I loans to allied nations were $11 billion. Repayment of these loans made for a sluggish economic growth in Europe.  In the past, U.S. economic crashes were a localized event.  The weak European economy and extensive U.S. investments coupled with its evaporation during the U.S. crash caused Europe to crash. 
  16.  Tightening of credit following stock market crash reduces demand for durable goods. 
  17.  The history of repeated depression made investors cautious.  Reduction in demand started the downward spiral in employment and spending.  This caused a lack of confidence, which brought on the sales of stocks and properties, and finally a run on the banks.   

[1]  From Regan to Bush through a failure to enforce immigration laws the illegal Hispanic grew from 3 million to over 12 million--some place it at 20 million.  In addiition 11 million from 1991 to 2000 have been granted immigration status.  There are currently 37 million first generation immigrants in the U.S. as of 2000.  In 2006 1,266,264 immigrants became permanent lega residents up from 601.516 in 1987.  Flooding the labor market for to cheapen labor and break unions. 



National media influence beliefs



Media attacks unions


Republican rule, progressivism dead



Massive immigration floods labor


Decline of unions & less purchasing power



Productivity & profits go to wealthiest who speculate


Mergers created price fixing and a pyramid of wealth



Lack of banking regulations and poor management


Federal Reserve expands credit



Farming bubble


Real estate bubbles Florida & California



Stock market bubble


Falling manufacturing burst stock market bubble



Declining investments in Europe entails declining exports to Europe


Weak European economy & U.S. investment there entails depression in Europe tied to U.S. depression



Tightening of credit entails less spending for durable goods. 


Reduction in demand starts downward spiral of employment & spending






Atypical causes:

  1. Growth in bank deposits (which aided credit expansion by increasing the reserve of banks, thus permitting them to borrow from the Federal Reserve banks):  Saving went from 17.4 billion in 1914 to 52.7 in 1928. 
  2. War reparation of German (payments) was unsustainable, and resulted in their economic collapse with its effects upon both European and the U.S. economies. 
  3. Farming bubble—we had instead the Iraq war and the tech bubble. 


Economic theories of the causes:

  1. Over production which resulted eventual in falling profits and wages produced the periodic depressions—averaging once every 20 years.  Falling wages and rising unemployment reduces demand for durable goods, which exacerbates the problem.  Declining product bursts the stock-market bubble.  There was little management of the economy prior to the New Deal.  It was the managed economy that nearly doubled the GDP of the U.S. in the period from 1937 to 1944.
  2. John Maynard Keynes, among others, theorized that an increase in government spending through the expansion of money (not higher taxes) when such spending produced a high level of employment, such as through public works programs, would reverse the downward spiral of a depression.  Models such as in Sweden and USSR were the best arguments for Keynesian economics. 
  3. Stagnation brought on in the U.S. by a closing of frontiers, falling wages, and a declining birthrate.  Improved mechanization of manufacturing that increased productivity, further reduced employment. 
  4. Keynesian economic was not adopted prior because examples of a government rapidly expanding the monetary base was always followed by a high level of inflation—a thing the masses wanted so as permit their payment of debt with cheap dollars, and thus a thing opposed by financial institutions. Only when Keynes argued for the expansion of debt coupled with controls of industries to prevent inflation, coupled with the dire needs and radicalization of the masses were government ready to intervene in the marketplace, and the financial and manufacturing interest reluctantly willing to permit it.  



  1. Farm prices dropped by 55 percent between 1929 and 1932 (this resulted in defaults on loans and reduced buying power). Foreclosures occurred for about 1/3rd of the farms.
  2. Manufacturing output fell by over one half between 1929 and 1932—the auto industry by over 3/4th. 
  3. In industrial cities such as Detroit, Toledo, and Cleveland more than half of the blue-collar workers were unemployed.   


More on the Great Depression, a continuation, at



The Great Depression, Jacqueline Farrell, Lucent Books, San Diego, CA, 1996


The Great Depression:  An inquiry into the causes, course, and consequences of the world-wide depression of the nineteen-thirties, as seen by contemporaries and in the light of history;  John Garraty, Harcourt Brace Jovanovich, 1986


The Great Depression and the New Deal, Robert F. Himmelberg, Greenwood Press, Westport Connecticut, 2001


The Great Depression:  America in the 1930s, T. H. Watkins, Little Brown and Company, New York, 1993  articles on FDR, Great Depression, immigration, and Federal Reserve.

Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."

Don’t miss the collection of Pod Cast links


Nothing I have seen is better at explaining in a balanced way the development of the national-banking system (Federal Reserve, Bank of England and others).  Its quality research and pictures used to support its concise explanation set a standard for documentaries--at  The 2nd greatest item in the U.S. budget is payment on the debt.