The Great Depression of the 1930s and the FED's Role in it

Although the Great Lockdown of 2020 shook the world but people will not forget the mark that the Great Depression of the 1930s caused. With a lot of people putting blames on free market, others on Farmers, lack of regulations by bank and so on. Never forget that for an economic crises to occur after a bubble burst, then there must have been an artificial increase in price leading to a boom. Although the boom before the 1930s wasn’t really artificial, it was caused by certain factors. The boom occurred within the period of 1921 to 1929.

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At the point, taxes, were reduced, people were living a good live as a lot of people could afford to buy a car and own homes, and this was possible as the FED was pumping in money to the economy. And people were receiving a lot of cheap loans that they did not care about the investment they made if they are good or not. The money in circulation during the time of the boom almost double the amount of money in circulation before the boom, it increased about 62% as people were allowed to lend money with low interest.

People were flooding their money into the bank and since the bank had the right to keep only 10%, they were able to print their own money to cover up for the money deposited when requested while the 90% deposited was used as loans. While will this be done? Since banks actually make profit from loaning money out, they were willing to loan as much money as they could and just leaving their little in the reverse. The FED was loaning money to stock investors at a very low interest rate.

Since the artificial boom caused by inflation was at its peak, the economy corrected itself and the stock market crashed in October 1929 also known as the black Monday and black Tuesday which allowed the stock market to drop about 30% in both days. Then unemployment followed peaking at 28.3% which was an actual effect of the recession. To me, the Great Depression was caused by the Central Bank and the government, and not the farmers