Depression: 1930s and now

A talk on the 1930s American depression held last week by Nicholas Craft, looked deeper at the Great Depression and the policies which could make a difference today.

Craft argued that contrary to general thought, fiscal stimulus was never tried and so it was not higher government spending that got America out of its depression.

What was needed was for something to offset the high amounts of money that cash banks and individuals were so protectively holding onto, and thankfully that happened when America’s central bank raised the supply of money after 1933. In short, argued Craft, what really mattered was monetary policy.

“It’s normal monetary policy which gets you out of a mess, even out of a depression” said Craft. Certainly the issues were looked at with the current fears of the recession in mind.

“The reason why a recession becomes a depression is because of the banking crisis…that’s why the current systems are so terrifying,” asserted Craft.

However, the talk also acknowledged various factors which made the current economic anxieties differ. One of which is the role of globalisation, hedge funds, “the shadow banking system” and securities which package debt away from sources in ways that go beyond the comprehension of banking executives.

“The talk was really interesting and informative” said a second year Economics student.

“I just wish it was less jam-packed, I had to stand up at the back and could only make things out over peoples’ heads,” he added.

“Regarding attendance, Nick Craft was a major pull factor” said another student, Gutu Sakar. “He is one of the big names of the economics department here, and a well-regarded academic. He is also a fine speaker, well liked by many taking his courses,” he explained.

Craft is a member of Staff in Warwick’s economic department and director of the Research Centre on Competitive Advantage in the Global Economy.