Will there be another depression in America?
Answer:
Economists still debate over the specific causes of the Great Depression. John Maynard Keynes had an answer in 1936: not enough government spending. Milton Friedman had an answer in 1963: not enough money creation by the Federal Reserve System from 1929-1932. Murray Rothbard had an answer in 1963: too much money creation by the Federal Reserve from 1924-1929 and too much economic regulation by the Hoover Administration from 1929-1932.
Keynes won the debate in academia for forty years, and in politics still has won it. Friedman has won the debate in academia, but not in politics, since about 1975. Rothbard's answer is acceptable only to those few people who trust neither the politicians nor the central bankers to fix the system.
Keynesians say it will not happen again because politicians will always run deficits large enough to prevent one.
Friedman says it will not happen again because central bankers learned their lesson. They will not again allow the banking system to run short of monetary reserves.
Rothbardians think that it will happen again. They debate over whether central bankers will first destroy the monetary units by inflation before the next Great Depression arrives. Meanwhile, they predict, central bank money creation will lead to a series of asset bubbles, all of which will eventually pop, and any one of which may trigger the next depression.
Many people think that the recession in 2000-2001 was of the same magnitude.
The perceived risk of a similar depression to 1930 is relatively controversial.
-On the con side: Many people think the financial market is much deeper and therefore more robust. The financial markets allow the ability to hedge away more risk and avoid systematic failures
-On the pro side: The emergence of highly levered derivatives that are not understood nor can be regulated threatens this.
Personally, I favor the con side. We've seen some huge shocks, the S&L crisis, oil spike in recent years, the interest rate cycle and the economy has performed pretty smoothly.
Cross your fingers!
America's economy right now is not really doin' good, but a depression similar that of the 1930's is unlikely to happen again.
Government institution has better tools to understand the economy and prevent a disaster similar to that of the 1930's/ Howevery, if gov't will not counter some of the issues hounding its economy, if it fails to identify the problems, then there is a lot more to it than just supply and demand
It is possible but not likely. During the Great Depression, the United States government took numerous steps that made the problem worse. While I am not one to underestimate the capacity of people to repeat mistakes, it seems unlikely that given the advanced state of economic knowledge, the government would do worse. Of course, they called World War One "the war to end all wars."
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