Myth

          The Great Depression was not the first depression America had seen. There was several more before it but the Great Depression did last the longest. There is a relation between money supply and the economy. When the government expands the money supply and the credit supply, interest rates fall. The money that is floating around is “easy money.” This money is spent on capital goods and helps businesses. Soon the interest rates rise and profits are lowered. The effects of the “easy money” wear off and inflation occurs. By 1928 the Federal Reserve System had raised interest rates by 4 times. The money supply lowered because of this which leads to the Great depression and they FED continued to raise interest rates. The Great Depression happened with many events spiraling to the economies fall, it wasn’t one huge occurrence.  A free market will run through the business cycle constantly and will suffer but it will fix itself. The economy was not fixed all by government intervention. Yes, the government helped a bit, but the economy began to repair itself with time. President Hoover implemented a laissez-faire economy, which means “hands-off”, or that the government shouldn’t help the economy when it is suffering from a depression.  When the Smoot-Hawley act passed which taxed all imported goods many problems arose. Unemployment skyrocketed and the tax on the goods nearly tripled. When Franklin D. Roosevelt became president in 1932 and he implemented The New Deal. The main focus of this was relief, recovery, and reform. While trying to set his plan in action he rose the government spending from 3$ million to 10$ million, putting the government in more debt than before. Most of The New Deal was recognized to be unconstitutional and was soon gotten rid of. With this, the economy began to slowly rebuild and recover itself.