What causes capital malinvestments?

These capital mal-investments can occur on such a large nationwide scale only by the government over-riding the checks and balances provided by the free market, i.e., making money “cheap” (forcing banks to lower the rate of interest) by “expanding the money supply”. This “cheap” money results in irrational investment into industries that would appear unprofitable if the government did not intervene into the money supply.

How does one prevent depressions from occurring in the first place?

To prevent such a depression from occurring only one action is required: keep government out of the money supply and marketplace, by establishing a free-market for money (other variations on this theme are possible, this is only one such alternative), repeal of all irrational regulation, and the installment into law of objective legislation (where it does not already exist).

What was the Stock Market Crash of 1929?

Black Tuesday took place on October 29, 1929. It was characterized by a depression with increasing unemployment (but still under 10%). During the stock market crash of 1929 unemployment peaked at 9 percent, and then drifted downwards until it reached 6.3% in June 1930.

What was the cause of the Great Depression of the 1930’s?

Anti-capitalist economists and historians claim the crash was the trigger of the great Depression of the 1930’s.

The Great Depression of the 1930’s was caused by the government’s intervention into the economy. The recession of 1929/1930 became “great” and prolonged by the government’s interventionist policies — from the Smoot-Hawley Tariffs to “The New Deal”– that prevented the market from restoring normalcy. Observe that in the 1920’s and 1987 Stock Market crashes there was no great depression, but minor recessions, because there was no great intervention.

What was the New Deal?

The New Deal was an attempt by Roosevelt to use the crisis surrounding the recession following the Stock Market Crash of 1929 as an excuse to intervene in the economy.

Interventions of the New Deal included: the National Industrial Recovery Act (1933) which controlled industrial prices and wages; the Agricultural Adjustment Act (1933) to control agricultural prices and output (paying farmers not to produce); the National Labor Relations Act (1935) to control wage prices by forcing employers to negotiate with government empowered unions; the Glass-Steagall Act which created the FDIC, federally insuring deposits; and many others. In addition FDR made thousands of executive orders which created further uncertainty and disruption of the economy.

Uncertainty led to people to hold onto their money (“hoarding”) as opposed to investing it as they were waiting to see what the government would do next.

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