Cause Of Great Depression And Cause Of The New One

I don't know why I'm doing this but I have the knowledge to so I will.

Just read and learn.

With the end of the Civil War, the country experienced feverish, unregulated growth, especially in the railroad industry, with the government giving massive land grants and subsidies to railroad companies. Thus, the massive overbuilding of the nation’s railroads, and the overinvestment by bankers of depositors’ funds in the railroads laid the foundation for the Panic and the depression that followed[citation needed]. A full economic recovery was not seen until 1878-79.

When the Civil War ended, a boom in railroad construction ensued, with roughly 35,000 miles of new track being laid from coast-to-coast between 1866 and 1873. The railroads, then the second largest employer outside of agriculture, required large amounts of capital investment, and thus entailed massive financial risk. Speculators fed large amounts of money into the industry, causing abnormal growth and over expansion. Cooke's firm, like many other banking firms, was investing a disproportionate share of depositors’ funds in the railroads, thus paving the way for the ensuing collapse.

In addition to Jay Cooke's direct infusion of capital in the railroads, the firm had become a federal agent for the government in the government’s direct financing of railroad construction. As building new track in areas where land had not yet been cleared or settled required land grants and loans that only the government could provide, the use of Jay Cooke’s firm as a conduit for federal funding worsened the effects that Cooke’s bankruptcy had on the nation’s economy.

If you like to get into stocks, you can go into the scam that the tycoons pulled you can read more into the history of that event.

[link to en.wikipedia.org]

Lets get to the GD

The causes of the Great Depression are still a matter of active debate among economists, and is part of the larger debate about economic crises, although the popular belief is that the Great Depression was caused by the crash of the stock market.

Yet what was the cause of the crash? Yet again....

Two economists of the 1920s, Waddill Catchings and William Trufant Foster, popularized a theory that influenced many policy makers, including Herbert Hoover, Henry A. Wallace, Paul Douglas, and Marriner Eccles. It held that the economy produced more than it consumed, because the consumers did not have enough income. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.[16][17]

According to this view, wages increased at a rate lower than productivity increases. Most of the benefit of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases. Say's law no longer operated in this model (an idea picked up by Keynes).

As long as corporations had continued to expand their capital facilities (their factories, warehouses, heavy equipment, and other investments), the economy had flourished. Under pressure from the Coolidge administration and from business, the Federal Reserve Board kept the discount rate low, encouraging high (and excessive) investment. By the end of the 1920s, however, capital investments had created more plant space than could be profitably used, and factories were producing more than consumers could purchase.

According to this view, the root cause of the Great Depression was a global overinvestment in heavy industry capacity compared to wages and earnings from independent businesses, such as farms. The solution was the government must pump money into consumers' pockets. That is, it must redistribute purchasing power, maintain the industrial base, but reinflate prices and wages to force as much of the inflationary increase in purchasing power into consumer spending. The economy was overbuilt, and new factories were not needed. Foster and Catchings recommended[18] federal and state governments start large construction projects, a program followed by Hoover and Roosevelt.

[link to en.wikipedia.org]

Now I'll leave common sense to you, consider the present events going on.