Myth or Fact? The Great Depression was caused by a failure of the free market and was resolved by government intervention.

False, I find the accusation that The Great Depression was caused by a failure of the free market. There are multiple things that contributed to period of economic struggle known as The Great Depression many of them being caused by the Government. I will expand on some of these topics throughout my blog article.

                The First step in which the government caused problems to come about in the market was when they created Expansionary Monetary Policy which is artificially low interest rates. The Federal Reserve created artificially cheap credit trying to create economic expansion. However, this caused for the stock market to become overheated causing the market to weaken.  Not only did the government weaken the market through trying to expand it but also decreased the supply of money flow in the economy which is known as Contractionary Monetary Policy.  This was very bad for the economy because when an economy is in a weakened state it is important that the money supply is increased so that interest rates are low. This is important because when interest rates are low and there is more money flow people are more likely to spend which in the long run helps create a strong market and national economy.  Not only was the government affecting the citizens of the United States but they also instilled what is known as the Smoot-Hawley tariff of the 1930’s.  That tariff placed the highest level of tariffs on imported good recorded in history. Most Economics would agree that is had a negative effect on the Nation’s economy. It’s obviously that if a tariff is too high other countries are not going to want to trade with us and even if they were trading with the U.S. they would most likely place a tariff back on the U.S. so in reality the Smoot-Hawley Tariff really did not help the economy in any way. At this point in time The Great Depression was already largely in place, so instead of the government letting the free market balance out itself the government felt the need to control the market even more. They did this by creating the National Recovery Act of 1933 and the Wagner Act 1935. These were acts which consisted of anti-business and pro-labor regulations which were largely controlled by the government. This had a negative effect on the economy because when small and large businesses are bombing most of the time the economy is too. This is because these businesses are creating products in which consumers would benefit from and want to buy which means money is being put back into the economy and is flowing freely.  However, when the government passes Acts that restrict businesses and when they create “jobs” such as clearing trees in a national forest and other jobs that really serve no purpose they aren’t creating money flow in the economy. Rather they are depriving there nation of its true potential to grow.

These are just a few of the example of why I think the government caused The Great Depression rather than helped the economy to recover. The implemented Acts that limited the chance for the economy to grow in technology and economically, and they restricted the money flow in the United States. Rather than controlling so much of the economic trade they should have just allowed the Free Market to balance itself out. Even if the Economy would have taken a little bit longer to balance itself out and recover the effects of a weakened Economy would have been much better than the effect of The Great Depression which was caused by the Federal Reserve.