Analysis of the Great Depression in International Finance

This report analyzes the impact of the Great Depression on international finance. The report begins by outlining the key events of the Great Depression, including the stock market crash of 1929 and the subsequent economic downturn. It examines the role of banks and the banking system during this period, highlighting the failures that exacerbated the crisis. The report references the work of prominent economists like Charles Calomiris, and Milton Friedman, and Anna Schwartz, who have studied the causes and consequences of the Great Depression. The report also discusses government interventions, such as the establishment of the Reconstruction Finance Corporation and the Federal Deposit Insurance Corporation, and how these measures aimed to stabilize the financial system. It highlights the shift in economic policy after World War II, including the management of short-term demand to prevent future crises. The report concludes by summarizing the key findings and implications of the Great Depression on international finance and provides a comprehensive overview of the economic and financial turmoil that occurred during this period.

Running Head: INTERNATIONAL FINANCE
INTERNATIONAL FINANCE
Name of the Student
Name of the University
Author Note

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Table of Contents
The Great Depression.................................................................................................................2
Reference....................................................................................................................................3

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The Great Depression
“The Great depression” was one of worst downturn in history of US economy, which
began in 1929 and end in 1930s. The crash of stock market in October 1929 indicated the
beginning of Great depression and by 1933, there was 25 percent of unemployment and about
5,000 or more banks were closed. The consequences of distress of bank for economy during
depression remains the area of unsettled controversy. It has been argued by Charles that the
variations in supply of the bank credit describes substantial amount of variations in the
growth of state income over the period (Calomiris and Mason 2003).
“The Great depression” resulted in unparalleled turmoil felt during early 1930s in the
sector of banking, which brought massive protection of government to banks in the form of
“Reconstruction Finance Corporation” and “Federal Deposit Insurances Corporation”. It
has been argued by Freidman and Schwartz that unlike the prior crises of bank, the response
of institution to Great Depression panics was inadequate. The failure in injecting the liquidity
into the system of banking made panics of the depression more intense compared to earlier
panics and sets stage for intervention of government for solving information externality
problem of the panics of bank. After war in UK, intervention of government for preventing
deficits of the aggregate demand resulted into norm and by end of 1950 and year 1960,
management of short-term demand become prominent in the way that it would have been
impossible in the early 1930s (Friedman and Schwartz 2008).

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Reference
Calomiris, C.W. and Mason, J.R., 2003. Consequences of bank distress during the Great
Depression. American Economic Review, 93(3), pp.937-947.
Friedman, M. and Schwartz, A.J., 2008. A monetary history of the United States, 1867-1960.
Princeton University Press.