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August 23, 2007

Comments

Chandresh Patel

Romar’s analysis of the Great Depression is interesting in that she contributes much of the Depression on the fault of America itself, separate from international influences. Economic shocks, such as the fall in demand and stock market effects, as well as the change in wages and prices primarily led to the economic downfall, in Romar’s opinion. I would argue that Romar’s points are valid, but do not encompass the entire picture. International influences would have affected United States foreign policy and may have had an input in the Depression. In addition, other internal factors, such as the great dust bowl in the Midwest during the late 1920’s, are not taken into account. However, Romar does present the facts and offers a reasonable reason to why the United States fell into such an economic catastrophe.

Evan Caso

As a student of Christina Romer's Econ 2, I really appreciate this reading assignment. It was clear and got to the point. I also was enlightened to the fact that the Depression actually ended in 1933, not in 1941 with the start of World War II. I looked up some GDP numbers and found that output had reached a trough and began its recovery in 1933. The article claims that a massive inflow of gold from Europe and a subsequent increase in the US money supply was the main catalyst for this recovery. Although this was surely an important catalyst toward recovery, could it have fully restored the economy in the long run? If the boost to output from World War II military spending had not occurred, what would have happened? Obviously, these questions are impossible to answer but are interesting to think about. Clearly, rapid increases in the money supply would have lead to inflation and would have no long run effects on output because of the neutrality of money in the long run. The economy was "sick" in the 1930s because of many factors, especially the collapse of the banking system. It is also clear from this paper that FDR's New Deal (it was not even mentioned) is assumed to have had a minor effect on the economy during this time. It is clear that a mixture of factors led the USA to full recovery. Surely World War II was a main factor, as massive government spending ensured a rise in employment. Other reforms that we take for granted, especially Federal insurance of bank deposits, led to long-run prosperity that we enjoy today. Overall, this article was very informative, and provides a perspective on how our economy has grown and matured since the Great Depression.

Andrea Roland

One of the reasons we study history is to learn from the past and (hopefully) not repeat the same mistakes. The Great Depression is one of those items from the past that we want to avoid in the future. The current timeliness of this reminder is helpful as the housing bubble bursts, there is a credit crisis, some people are losing their homes and there is uncertainty and volatility in the stock market with the words “South Sea Islands” bandied about. It was encouraging to see that the current Federal Reserve Chair, Ben Bernanke, has written several papers about the Depression and thus should have insight into the current economic world to avoid such a situation again. Although we are currently seeing a monetary tightness, the gold standard is not an issue at this time, though according to Romer (pages 26, 28) it was a consideration in 1929 and beyond. There are also parallels in consumer spending as it appeared to play a large role in 1929 and 1930 and so is followed carefully today. Uncertainty (page 31) played a role then as does it now. It is not the knowledge but the unknowing that tends to cause stock market gyrations.

Shuwen (Shirley) Liu

In Romer’s article, she talked about the cause of the Great Depression and what’s U.S. government’s strategy to solve this problem. She mainly pointed out that the cause of Great Depression is from domestic problem, instead of international policies. And the domestic problem is the falling domestic consumption. Because the U.S. government tries to control the outflow of gold, they come out a more conservative monetary policy and such policy cause common people worry about the country’s economy and lead to less consumption. Romer as many economists, once again shows the disadvantage of government interference to the free market. According to free market concept, the market will re-correct itself without any interference. Even though Romer focus her point on the domestic economy, international economy should also be a major factor that cause the Great Depression to U.S and the whole world. It should have a same weight as domestic economy when it is in the discussion of Great Depression.

Andrew Fong

In the article, "The Nation in Depression", professor Romer examines the primary causes of the Great Depression throughout major industrialized nations around the globe. Although she comments on how the U.S. depression was related to the policies of foreign countries, she focuses primarily on the features of U.S. industrial production at the time. Romer indicates that although a drop in infrastructural projections did come before the U.S. great depression, the drop in output is otherwise more significant.

Moving onto the recovery of the depression, what struck me the most was Romer’s comments on how U.S. production of investment goods were four times as high as production of consumer goods and how in other nations it was a factor of two to one instead. Although to myself, these numbers in investment production as compared to other nations seem to suggests that the U.S. should have recovered faster, Romer suggests the very opposite. Indicating, the immediate effect of the production of consumer products in the U.S. as opposed to other countries was a more significant factor in determining its recovery time. This may have been due to the fact that the population size in U.S. was much greater, proving it necessary that consumer production was more important than investments.

Ian Ebert

I found Romer’s article about the great depression very interesting and somewhat easy to follow. What I took from the article is that Romer believes that the great depression was caused by domestic problems. Romer’s claims the great depression started with people being tight with their money spending which led to the stock market crash in 1929. Romer believes the crash resulted in consumer uncertainty, which ultimately resulted in aggregated demand and supply to decrease. Romer also says the thing that made the depression worse was that the banks began to panic, and because of tight monetary policy in the 30s this led to reduced liquidity and a decrease in consumption. All these issues contributed to the great depression, and Romer says it was until FDR told the fed to increase the money supply that things began to get better. Romer adds that it was until WWII that the US economy saw extreme recovery.

Angela Vullo

Professor Romer's analysis of The Great Depression shows how extensive the effects of this depression were. It not only greatly impacted the United States but many other countries as well. My grandmother told me stories about her life as an orphan during the depression and I am so grateful for all the things that I have now because she lived a very difficult childhood due the the great poverty of teh entire nation at that time. For example, my grandmother had dentures by the time she was 20 years old because she didn't have enough calcium in her diet during her youth adn all of her teeth fell out. I am lucky that it is very unlikely that I will ever have to struggle with something like this due to a National Depression.

Wei Shao

It would appear that the Great Depression was inevitable, as the stock market bubble would have burst had not the Fed done anything to interfere. However, what the Fed did actually exacerbated the whole situation and made it worse. Prior to the stock market bubble burst, the Fed initiated a tight-fisted monetary policy in order to stem speculation of the stock market and to prevent outflow of gold. When the depression hit, however, the Fed was unable to react to the financial crisis that was hitting the rural banks because such expansionary monetary policy would result in a loss of gold. Personally, I would like to attribute the severity of the Great Depression to simply bad luck and bad timing. The Fed simply made all the wrong decisions at the wrong time, and was ultimately saved by the onset of WWII when money supply was drastically increased. Somehow, I do find it ironic how the Great Depression was only made "great" because the Fed didn't want to lose gold and reduce its wealth, yet because of their decisions, the money supply ultimately increased, leading to a depreciation of the greenbacks in the world economy, thus lowering its economic value and reducing the wealth of the U.S. in real terms.

Breana Pennington

Romer’s article gives a great overview of the domestic policies that helped to spur the Great Depression. I would have liked the article to discuss further the ideas of why the initial decline leading to the depression is seen in the fall in production of consumer goods and, in contrast, why recovery was stimulated by investment goods. However, it was really insightful to learn how detrimental the decisions of the Federal Reserve were in actually harming the nation’s recovery. It is surprising that, in 1932, the Fed reverted back to a contractionary monetary policy even after they had seen to positive gains within the temporary expansionary policy adopted after a threat from congress. Overall, this was a very insightful article on the domestic role in shaping the Great Depression.

Lauren Tombari

I have always loved studying the Great Depression, so I found Christina Romer’s article, “The Nation in Depression,” particularly interesting. Looking at the Great Depression from an economic standpoint put a completely different twist on the causes of the Depression and the subsequent recovery. I think it is an indicator of the large size of the US economy that the decline in output was more than double that of most other countries, and that the decline largely consisted of consumer durables.

Also, some of Romer’s facts completely changed what I had previously known about the Great Depression. That it was Roosevelt’s policy decision to increase the money supply and cause inflation, rather than his numerous programs that essentially created jobs where there weren’t any to be had, that initiated the recovery was completely new to me. Additionally, I had learned in high school that declines in exports basically put a halt to world trade, which really worsened the Depression. Romer completely disproves this, showing that the decline in net exports only decreased real GDP by 2%.

I also found it interesting that Romer mentions that the Soviet Union did not really suffer from the Depression at all. Romer just uses the Depression in other countries as a basis for comparison to the United States, but I would have liked to learn more about the experiences of other countries.

Sean Salas

Romer's article on the Great Depression raises a lot of great points in regards to the causal factors of the depression, and its domestic and international consequences. Some of the points I most enojyed about the article was the role of the FED and the Gold Standard during the time of the crisis. Romers discloses information regarding the FEDs inexperience and its fear to deplete the gold supply which caused it to hesitate in enacting expansionary policies at the break of the Depression. Moreover, the role of the government in this scenario intervened or at least forced the hand of the FED to increase the monetary supply in 1933. This dynamic between government and the FED is non-existent today, even in the fear or existence of a recession.

Other interesting points of the article concerned the arguments for the recovery of the US of the Depression. It is very common today that many people hear World War II was the prime cause of America's recovery. Romer does an amazing job in disclosing other factors such as expansionary policy, devaluation of US money, and the inflow of foreign gold.

In sum, this reading offers a lot of fruitful explanations which grant the reader a strong foundation in understanding different offsetting dynamics in the US economy.

Dawn Oberlin

I enjoyed reading Romer’s article because she presented her conclusions about the Great Depression and what led up to it in a structured way. Her analysis of each country’s industrial production made sense because this measurement encompasses many factors that caused the Great Depression. Romer basically discusses the tight monetary policies that were established throughout the 1920’s, which eventually led to the stock market crash in 1929. This crash is what caused consumer uncertainty, and this led to the decrease in aggregate demand and eventually decreased output. Romer further explains that these events alone were not what fully caused the 30’s to be so bleak. Combined with bank panics and even tighter money policies that began in the 30’s, these factors led to reduced liquidity and ultimately decreased consumption. Overall I thought Romer’s article did a good job of highlighting all aspects that took part in creating the Great Depression.

Niki Chen

I actually was not aware that other countries around the world also suffered significant depressions during the 1930's. I have only heard a lot of stories about the Great Depression in the U.S. without understanding the exact effects of what happened. From this article, I learned that the U.S. depression was immediately worse than other countries. "Industrial Production declined 21% in the first year." According to the article, this fall in industrial production was concentrated more on consumer than industrial goods. The U.S. suffered a large peak to trough decline compared to other countries.

It seems the U.S's strength in recovering from the depression was stronger than other countries and skewed toward investment goods but also that the U.S. was one of the last countries to recover. From this article I learned that we can examine the causes of the Great Depression using a simple aggregate demand-aggregate supply model. That a series of shocks caused aggregate demand to decline along the aggregate supply curve. This led to deflation and unemployment.

I also read that banking panics due to declines in production led to pessimism among consumers and businessmen. This helped to deepen and sustain the Great Depression. The article mentions that the American banking system's organization made it more susceptible to bank runs and local shocks.

I thought that the conclusion of the article was the most interesting because it clearly traced the path that took the U.S. from recession, through the stock market crash, through a worsening depression, and finally, on it's way to recovery. It's amazing how much we can learn about this historical economic crisis.

Andrew Grosshans

When I studied the Great Depression in my eighth grade history course, I learned that the primary cause of the depression lay in the stock market crash and the accompanying decline in wealth. In “The Nation in Depression,” Christina Romer discusses the large effect that the stock market crash had in triggering the Great Depression, but, instead of attributing the decline in consumer spending and the downturn in industrial output to the loss of wealth in the stock market, Romer argues that the largest reason for the decline in output lay in the uncertainty over the economy’s future caused by the crash. Whereas my eighth grade textbook devoted pages to describing how irresponsible practices of purchasing shares on margin accounts deepened the extent of the crash, Romer instead presents a clear argument and analysis explaining how uncertainty about the economy influenced the downturn in industrial output through its decrease in consumers’ purchases of irreversible durable goods. Comparing the two and considering the small fraction of the American population that owned stock at the time of the crash, the difference between a textbook account designed to neatly explain an historical event to eighth graders and a thoughtful economic analysis of the same event is readily apparent and demonstrates the importance of such analysis in affording a clearer picture of our economic past.

Kristin Rose

I found this article to be a very interesting study of the Great Depression from a perspective that I think is not often covered in US history courses; in particular, I was intrigued by the comparative focus that Romer had throughout this article. While I knew beforehand that the Great Depression was not limited to affecting the United States, it was interesting to see concrete figures about how similar patterns of industrial production were for many countries during the early 1930s. For example, Romer states that for 15 of the 22 countries who had a trough in industrial production during this period, that low point occured in 1932. It can be inferred from this observation that the factors which facilitated international trade before this period, such as the gold standard, were also instrumental in the spread of the Great Depression throughout the international economy.
In addition, I thought it was interesting that the sector of the US economy that was earliest affected by the Great Depression was the production of consumer goods, while the earliest recovery was seen in the production of investment goods. This does make sense intuitively, though, since if a government is putting efforts into economic recovery, one would think that they would focus on investment rather than consumption.

John Janda

Romer does an excellent job of discussing how consumer uncertainty and a decrease in demand for durable goods were key causes of the Great Depression. Her comparison between the United States and other countries shows that although many countries had a severe recession, the United States had a very early and deep recession compared to other countries due to its unique characteristics, especially those involving local banking. I was quite surprised to learn from this article that the United States recovered so quickly in comparison to other countries due to the increases in the production of investment goods. Although there have been many changes to the regulation of banking and other industries, I can’t help but think that many of these situations, especially a banking panic and loss of consumer confidence, could easily happen again. Another Great Depression is probably unlikely, but this article does point out that the American economy can be greatly affected by consumer spending and confidence.

Aseem Padukone

Romer’s piece plays an important role in dispelling the notion that the Great Depression in the United States was a result of a combination of international factors. Rather, these factors supplemented the already struggling American economy. The findings of this article place accountability of the Great Depression primarily on the Federal Reserve. External factors such as the Gold Standard led to more errant domestic policies and perpetuated the Great Depression.

The most important part of this article is how it shows the interrelatedness of a number of economic issues, and how a combination of factors can serve as a positive feedback loop. While domestic policy in itself was enough to cause a recession and economic hardship, other factors aggregated to form much larger problems for the economy as a whole. This demonstrates how actions taken by public policy officials and economists need to be taken with the utmost caution, as they must foresee potential hindrances that may arise to harm the economy.

Christina Kiang

It is very easy to blame problems on exogenous variables but Romer takes a different perspective on the Great Depression. Consequently, she evaluates the domestic happenings of the Great Depression era. I found it extremely valuable that she proposed her ideas through different stages of the Depression. She opens with the claim that the start of the recession was caused by an increase in nominal and real interest rates. She then states that after the stock market crash in 1929 the uncertainty of future income was a great factor in the decrease in consumer spending. In "the worsening" period, a series of bank panics propelled the U.S. economy towards further decline. She emphasizes that American banks were easily susceptible to collapse due to the small and undiversified organization. It is disappointing to realize that The Federal Reserve did not use expansionary open market policies earlier due to fear. Fortunately, in the new few years, the combination of the enlightened Federal Reserve due to pressure from the Congress and the influx of gold standards from a chaotic Europe helped revive the economy.

Min Ru Jiang

From Romer’s article, I can see the comparative impacts among variety countries due to the Great Depression in 1930s. The author uses the annual data on industrial productions of 24 countries efficiently to illustrate the macroeconomic well-beings and effects to those countries before and after the Great Depression. It is clear that US was the most influential country by the depression and experienced a great slump in industrial production of 60%; it hence resulted in a significant economic recession.

It is important to know that shocks on aggregated demand and stock market crash led US to an economic recession. Aggregated demand shifted inward largely could be explained by the spending hypothesis and the money hypothesis. Spending hypothesis is declining consumptions direct to downturn in stock markets; this is known as the wealth effect. Also, the decline in aggregated demand was caused by the decreases in money supply. However, increasing money supply was one of the important methods to guide US recovering from depression.

Timothy Wong

Romer does a good job explaining and examining the primary causes of the Great Depression in this article. It’s interesting to see what caused a recession in most of the countries in the world. Romer talks about how the increase in consumer uncertainty and a decrease in demand for durable goods were the key causes of the Great Depression. The U.S. had it worst because of the banking system.

It’s seems very reasonable that the U.S. could’ve recovered from the great depression a lot faster if it spent it’s production on consumer products instead of investment. Consumer consumption of products would support the economy and will help expand the market back. However, production of investment products are needed at first to help fuel the economy with a source of income or wealth.

Kelly Yang

Romer’s article the argument that the cause of the Great Depression was not due to international policies; instead, it was because of poor domestic strategies. The problem was the lack of certainty in home market which caused a fall in aggregate demand prior to the actual crash. This really harmed the economy because of the huge fall in domestic consumption which already decreases output and it is further decreased after the Stock Market Crash. Also I found Romer’s analysis of the gold standard to be interesting. While other countries found economic relief in periods preceding end of the use of the gold standard, Romer claims that the ability to manipulate the money supply and enter a recession faster are not necessarily impacted greatly by ending the gold standard. I found this really interesting because after the British got off the gold standard in 1932, their economy began recover, adjust interest rates and in turn, manipulate the money supply.

Anthony Samkian

In previous U.S. History courses I learned that the Great Depression was simply caused by the stock market crash. But this article gave me a more detailed insight into what combination of events produced the greatest recession in U.S. history. Romer explains three key events that set off the depression and contributed to its severity. The Fed’s effort to stem the stock market boom by raising interest rates, the stock market crash cutting consumer and producer spending, and the series of banking panics which further lowered consumer spending and investment because of higher interest rates and general pessimism among consumers and producers. Another interesting point Romer makes in her article is that the drastic increase in the money supply was the primary source of American recovery and not World War II, as it is commonly noted. Romer credits the Roosevelt administration for this increase in the money supply by fixing the dollar at a lower price. She also argues that political unrest in Europe, which caused Europeans to invest in American assets and buy dollars with gold, is another factor that further increased money supply. The greater money supply then pulled down interest rates and stimulated consumer spending, leading the U.S. economy out of the depression. All this shows that the Great Depression was mostly a domestic phenomenon, meaning that it might have been prevented or limited in its magnitude with different policy decisions. But of course it is extremely difficult to foresee the effects of a decision when so many different issues come into play, which is why it is so important to learn from history.

Krista Seiden

In her article, "The Nation in Depression," Christina Romer gives an overview of the Great Depression, its causes and what eventually brought us out of it. It is important to understand these causes because as future economists, we need to look to the past and learn from its mistakes so we don't repeat them for future generations. Romer talks about the tight money policies of the late 1920's which led to the crash of 1929. She says that this crash led to consumer uncertainty which then caused a fall in aggregate demand, resulting in a fall of gdp. The reaction of banks and consumers to these negative forces caused further recession. Interestingly, however, Romer shows that the depression actually ended in 1933 when FDR instructs the Fed to increase the money supply which led to a slight recovery. I had always thought that the depression didn't end until the start of WW2 and the economic recovery that brought, but it is interesting to see that the economy did indeed start to recover much earlier than this.

Richard Park

Responding to Chandresh Patel’s comment of Romer’s article, I agree that the United States government acted in ways which worsened the condition of the Great Depression; however, I believe that those actions were not separate from international influences. Romer points out that the Great Depression began when the stock market crash caused many consumers and firms to abandon US goods, and conditions deteriorated even further when banking panics swept the nation. However, the main reason for the stock market crash was the recession in mid-1929. Furthermore, this recession was caused by the tight monetary policy of the US at the time, a monetary policy aimed to restrict gold outflow. American policies and shocks ultimately accounted for the severity of the Great Depression, but there were international elements which contributed to the condition of the country as well.

Qingyun Tang

I didn’t know what really caused the Great Depression before reading these articles. This one interests me the most because it talks about why the Great Depression happened rather than just an overview. It all started with the crash of the stock market, then people spent less money to buy things. The sudden drop of aggregate demand leads to a lower output, which result firms to cut wages and lay off employees. This vicious circle just went on and on, causing the whole economy going bad. Also, a series of bank panics further hurt the economy. The government ensures that it won’t happen again today by putting insurance on the banks with FDIC. I was shocked to know that the government didn’t propose any expansionary policy before the recession occurred.

Huinan Zhang

Romer's article, "The Nation in Depression", has a very distinct point of view compare to other opinions. The author contributed the causes that lead to Great Depression to the United States itelf rather than the exogenous factors from foreign countries, even though many countries in the world suffered the huge decline in their economy also. Besides explaining the rols of stock market crash that lead to the Great Depression, she further more stated the continuing effects. Due to the stock market crash, people start to be uncertain about the economy and bank started to panic; these just push the US economy to a even lower point. It is believed that only if we can clearify every trigger for the Great Depression, can we try to avoid the similar depression happen again in the future.

Kyle Jeffery

Christina Romer’s article challenges common beliefs on how the Great Depression unfolded and explains the economic reasons for each phase with great clarity. In grade school history courses, I’ve been taught that the depression started with the stock market crash and ended when the outbreak of WWII led to an increase in industrial production and an influx of currency into the economy. The truth as described by Christina Romer differs in that a recession preceded the stock market crash. As for the end of the depression, while there was an influx of currency, it was due to European investments at the beginning of the war, not the industrial war machine firing up. I had never considered the effects of bank failures on consumer credit. We take for granted the credit-monitoring institutions that are above the influence of economic fluctuations and which store our information without worry. I found Romer’s criticism of the inaction of Federal Reserve to be well-deserved because it failed the country at its time of most desperate need. She describes a “power vacuum” and deadlock on crucial decisions that would have spurred the economy by instituting expansionary policies. I also find it intriguing that the executive branch found a way around the fed to implement its own inflationary action. FDR took initiative in the way only a three-term president could.

Anna Romanowska

Although Romer claims that the international crisis of the Great Depression were not as significant and not as distinct as the US economic struggle, I found it very interesting to see the conditions of other countries in the late 20s and early 30s. The comparison on the international level gives an extra dimension when analyzing the American economic downfall and recovery.
I found it very interesting that although US was a free market, capitalist economy where the business cycle could freely take its course, it was the Fed that mainly affected the economic conditions in the late 20s. The tide monetary policy had substantially reduced economic activities and introduced uncertainty among consumers. It makes a lot of sense that the new monetary policy, the increase in money supply, was the driving force of the recovery.

Joseph Chang

After having read Romer's article, it seems pretty damning -- The Federal Reserve ruined the lives of millions of people. While a quarter of the people were unemployed with many more unsure and frigthened about their own welfare, it took a "threat from Congress," "emergency powers" from a president, and finally political upheaval from abroad before monetary policy could be loosened and, ultimately, recovery could begin to take place.

One thing that seemed curious was that Romer said exports were 6% of GDP during the onset of the depression and that seems pretty close to how exports stand right now(7.8% = $1.024 trillion / $13.06t). And looking at the opening quote by Arthur Lewis, how would a uniquely American economic disaster affect the rest of the world today? What if the recent and explosive trend of selling and dividing up risk leads to a new type of financial panic unique to America? Nonetheless, after having read this paper, I feel confident that the Federal Reserve would never let something similar happen again.

And, how exactly did the depression in the United States affect the economies overseas?

Brandon Leong

Romer's article highlights very subtle yet important differences that actually happened from what we learned in our high school textbooks. For example, I was taught in high school that our entering into War World II brought us out of the Great Depression. However, Romer states that the war was not the main source of American Recovery. The main source was the increase of the money supply.
Another aspect I found very interesting is that Romer clearly explains the Great Depression with models that I learned in Econ 100b, Macro-Economics. I never thought such a complex problem such as the Great Depression could be described with such relatively simple models.

Min Park

The most interesting aspect of Romer's article is that she is able to explain both the domestic causes of the Great Depression and the path to recovery for the United States while still giving us updates about the international economy at that time. Not only was the United States heading toward a recession in the late 1920s and the beginning of the 1930s, but other nations around the world such as Great Britain and Germany were suffering also. This example alone showed me that not only the United States economy was suffering from a decline in production, but the Great Depression was mainly caused by logistical procedures to handle it.

Since interest rates were high at that time, the United States began to tighten up its money supply. This added more dependence upon the stock market, so that when it crashed, the entire American economy crashed also. This is a really simple explanation of why the Great Depression had such a large effect as it did, as i always believed that there were more extraneous factors such as the overvaluation of stocks, inflation, etc. But, Romer makes her point very simple.

Romer's interpretation the American economy began to recover in 1933 and not at the onset of World War II was a fresh idea to me as well. I have always been taught in my United States history classes throughout school that the increased demand for industrial products for weaponry and the war was the saving point for the United States economy. I had no idea that recovery had already began with an increased money supply. This idea seems far too simple and far too relevant to my economic theory courses to be possible, but I researched the theory on Google and there are others who believe the same!

This was an interesting article to read as it integrated simple economic theories into new (at least to me) perspectives on both the causes and the solutions to the Great Depression.

Tanya Malik

Romer's article is one of the more interesting ones that we have read so far, in my opinion. it was very easy to follow and was straight to the point. According to Romer, the Great Depression was a result of domestic actions. More specifically, a decrease in American consumption. This decrease in consumption led to the stock market crash in 1929, which in turn led to unfavorable consumer expectations of the market. This ultimately caused a decrease in aggregate demand and supply. Romer also points out that although the effects of the depression were for the most part the same around the world, the causes for each country were rooted in different problems. She also argues that World War II was not the main cause of recovery, but instead an increased money supply.

Yelena Vinarskiy

Romer argues that after a stock market boom in the late 1920’s, the Fed practiced tight monetary policy. She mentions that industries that were first affected were those that were typically thought to be interest-sensitive, such as housing and construction. This gradual decrease in interest-sensitive spending culminated in the stock market crash of October 1929, which then led uncertain consumers to cut their spending. Then the depression was made worse by the banking crisis and gold standard problems that Romer describes. However, I found it very interesting to learn that the roots of the depression lay in these decreases in interest-sensitive spending. Given the housing crunch that is currently taking place in our economy I found that point to be very relevant. Of course American monetary policy has learned many lessons from the Great Depression and would not let the decline in construction culminate in as great of a recession, I still think there are parallels that can be drawn here.

Minna Howell

In Romer's article she attributes the severity and longetivity of the Depression in the United States to uniquely American causes, such as national aggregate demand shocks and American monetary policies. She also argues that although international causes had some effect on US domestic policy decisions and although declining exports did account for some of the onset of the recession, the international causes were not nearly as important as the American causes. For example, when the Federal Reserve decided to tighten their monetary policy, she argues that their decision was in part a response to the outflow of gold to France, but mostly related to the stock market boom. Initially the decrease in domestic consumption spending was a result of tremendous uncertainty about the future. Then, as more and more banks began to fail, the American consumer's attitude morphed beyond mere uncertainty into one of pessimism. Romer argues that the Federal Reserve's inaction at this crucial time further elongated the recession. The United States was able to recover because of a high increase in the money supply, which led to devaluation and a fall in interest rates. Here Romer also points to the political unheaval in Europe as having a minor role in the recovery of the United States because of the subsequent gold inflows from Europe. Romer's attempt to be as thorough as possible in explaining the onset and severity of the Great Depression in the United States causes her to take note of the international underpinnings of the Depression. I feel that the empirical data and evidence she thus gives weakens her argument and her emphasis on the importance on the uniquely American causes of the Great Depression. Though she interprets many of the international causes as playing a minor role, it appears as though she purposely downplays their significance in order to further her argument.

Kevin Nakahara

The worldwide collapse of national market economies which started the Great Depression indicates the emergence of internationally-linked economies and globalization. The extended period of decline in the United States compared to the rest of the industrialized world indicates the significance of the artificial stock market boom during the 20s and how its collapse had long lasting repercussions in both industry and financial dealings. I found it interesting that, although the war helped the US economy of the Depression, it was done by indirect means rather than increased productivity in a war economy. It is slightly ironic that the United States's perceived neutrality attracted foreign purchases in assets, helping the country out of recession, while also making it vulnerable to the attacks that were late to come.

Ronald Yokubaitis

I felt that Romer's article was very interesting since it actually puts the blame on the United States itself rather than external forces. The article explains why America was responsible for this immense collapse in the United States and around the world.

First of all, money started become very tight in the late 1920's. Then the article explains how the stock market crash of 1929 led to a large amount of consumer uncertainty. This in turn decreased aggregate demand of our economy which finally led to an overall decrease in our national output as a whole.

Romer really stresses the events that led up to the great depression rather then something that just happened overnight because of the stock market crash. It is important to really dissect this topic so that our economy can identify the signs and avoid such a terrible collapse in the future.

Justin Fong

Romer's article was especially fascinating because of the broader global dyanmic regarding the Great Depression. Prior to reading this article, I have only been exposed to the causes and effects of what America experienced in the late 1920s and early 1930s. It was interesting to discover that the initial downturn in the American economy resulted from a drop in consumer goods, while the rebounded growth period saw an increase in the production of investment goods. I think Americans probably felt more confident and secure in first rejuvenating their investments before they began consuming products such as durable goods. In France, the opposite happened, which may be explained by a study that the country peaked industrially in 1930. French consumers were more likely to be consuming goods being produced domestically instead of investing. Also, due to how the United States appeared to fall the hardest during the Great Depression, I believe the nation's ability to rebound was greatest among the rest of the world. America had the land, labor, capital, resources, education, and entrepreneurial spirit to regain the necessary momentum to combat this severe recession.

Christopher Avedissian

Romer's article was very intriguing for her argument concerned the fact that the Great Depression and its devastation was mainly the mistake of national causes rather than international causes. And she also illustrates how the Great Depression didn't dissipate due to America's entrance into World War II, but rather to the increase in money supply and a fall in interest rates. In my high school history class I was taught that America pulled itself from the Great Depression through World War II, and that was that. I guess that's another fact to add to James Loewen's "Lies My High School Teacher Told Me." Romer was subtle and to the point, and I enjoyed her article, and her explanation as to the Federal Reserve's lack of quick response to the depression was quite the good argument. As consumer's lacked hope of the future, and we're dissuaded from spending and investing, they became negative/pessimistic and the economy descended farther and farther down. And the Federal Reserve were remained still, and this long pause resulted in the Great Depression lasting for longer than it should have. All in all, America recovered and moved on, but Romer shows that the Great Depression could have been handled more efficiently.

Sherry Wu

I read Romer's article to gain a comprehensive view of the Great Depression, and that's exactly what I got. Other readings concerning the Great Depression mentioned economic effects that the American downturn had on foreign nations' economies, but emphasize that the severity of the downturn and the causes were uniquely American. I find it a little ironic that Romer names domestic factors as the main causes of the Depression, but also acknowledges Europe's political upheaval as the cause of the massive influx of gold into the U.S. It makes me wonder how other historians and economists view the Great Depression, and whether this view focuses on domestic causes because it has been so deeply ingrained into our society. For example, how would a Japanese historian view the downturn, and how would s/he compare it with Japan's economic slump in the 1930s?

One interesting thing I learned, however, was that World War I was not the catalyst that stimulated the U.S. economy. Neither was the recovery due entirely to the expansionist policies and radical programs of Franklin D. Roosevelt. Romer writes that the economy began to recover in 1933 due to huge increases in the money supply. Romer's description of the aggregate supply and demand shifts helped me see the trends of the Depression more from an economist's perspective.

Katelynn Nguyen

The Great Depression was in a way unavoidable even if they Fed did not interfere with the markets. Nonetheless, their involvement had actually worsen the financial situation of the US. Before the stock market crash, the Fed had enforced a strict monetary policy so that more investors would speculate in the stock market and to prevent the outflow of resources like gold. When the crash of the stock market occurred, the Fed did not know how to respond to the situation as they did not see it coming. The financial crisis had weakening the rural banks due to the strict monetary policy. Ultimately, the Fed had made the wrong decisions at the wrong time; overall, the timing and luck of the US markets at the time were not in luck. I find that the financial status of the US at the time was due to the actions of the Fed as well as the timing of their decisions. By the end of te depression, the country was able to revive due to the increase in the money supply. I find it ironic that the depression an the crash of the stock markets was able to reestablish the stock market afterwards.

Ryan Smrekar

The United States' stock market crash in 1928 was the impetus for the Great Depression in not only the US but the global markets. With problems like the outflow of gold, rising interest rates, and failing local banks, the Great Depression plunged both the US and global markets into a state of ruin. With the fall in consumption in the US, by virtue of the production function, output also decreased. Some other articles have argued that the blame rests on global market forces or other international effects, however, Romer makes the blame sit squarely upon the US. It is however, a testament to America's resolve for being one of the leaders in economic recovery, this may however be due to the factor endowments that we have been blessed with.

Jenna Lee

The biggest thing that stoof out to me about Christina Romer's article was that she deals with a lot of domestic issues rather than international ones. Although I do agree that domestic affairs are important, I do not believe that they are the only things to take into account. International concerns are also something to take into account, and I do not believe that Professor Romer covered that area in her article very well. However, although the international events were left unsaid, I thought this article was very clear and to-the-point. As a former student of Professor Romer, this article was especially exciting for me to read. She makes it very clear that the Great Depression was not something to be reckoned with and that we should do everything in our power to stop it from happening again.

Jenna Lee

The biggest thing that stoof out to me about Christina Romer's article was that she deals with a lot of domestic issues rather than international ones. Although I do agree that domestic affairs are important, I do not believe that they are the only things to take into account. International concerns are also something to take into account, and I do not believe that Professor Romer covered that area in her article very well. However, although the international events were left unsaid, I thought this article was very clear and to-the-point. As a former student of Professor Romer, this article was especially exciting for me to read. She makes it very clear that the Great Depression was not something to be reckoned with and that we should do everything in our power to stop it from happening again.

Jenny Kwon

Christina Romer examines the onsets of the Great Depression and minor effects that caused the recession. The U.S experienced a depression that was greater than other countries and was the last to recover. The main reason for the Great Depression was the dramatic decline in output. The stock price movements made consumers and investors extremely uncertain about the future; therefore, they stopped spending on irreversible durable goods. The U.S was stuck in a depression partly because the Feds didn’t take action with changing the monetary policy. The reason why the Feds initially didn’t take action was because they were afraid that monetary expansion would reignited speculation on the stock market and cause a reoccurrence. Christina explains how the Great Depression is known to be uniquely American and caused by American roots.

Sung Rho

I learned a lot from reading Romer's article of the Great Depression. I've read other readings about the Great Depressions, but none like Romer's article. It was interesting to me that he mentions about the Great Depression having an economic effect for foreign nations as well. Also it is interesting to note that he mentions about domestic factors as the main reason for the Depression. Anothering point i would like to bring up is about how the WWI was NOT the reason that stirred the U.S. economy. The recovery or the downfall from the WWI however the recovery began in 1933 because of increases in money supply. All in all, it was interesting to see how Romer mentions about domestic cases, but also many international cases such as when the Federal Reserve decided to tighten their monetary policy, their decision was based on the outflow of gold to France.

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