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December 3, 2021
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How money was thought. Part 9. Overcome the crisis! |

Last week in this cycle, we looked at how the communists thought about money. Today we will show you how the crisis was fought in the 1930s and how it changed the way people think about money.

The Great Depression

Analyzing the reasons for the crisis that began in 1929 is a topic for another article. For the purposes of this, we will present its origins rather briefly.

The famous Great Depression began in October 1929. It all started with the Wall Street stock market crash. It is worth noting that the US authorities tried to fight the problem using completely different methods than it is currently the case. President Herbert Hoover and his advisers opted for a deflationary policy. Customs duties were also increased by as much as 40 percent. Immigration regulations were tightened on the occasion. In addition, the Grain Stabilization Corporation, founded in the following year, purchased grain from farmers who might have problems selling it. The public works program has started.

This is not the end though. Later in the program, taxes implemented by the government were raised by as much as 40 percent.

John Maynard Keynes (right) and Harry Dexter White at a conference in Bretton Woods

It was all based on state intervention. It was recognized that the role of the state should be greater than had been believed for centuries. It should be able to intervene heavily in the economy to help it recover during a collapse.

John was the creator of the concept of interventionism. M. Keynes. It assumed creating market demand through public expenditure, such as public works, social benefits, armaments, subsidies to farmers for reducing production, etc. The problem was that – as in the case of subsidies to food producers for the lack of overproduction or unemployment benefits – the government spent the resources, but it did not increase production. As if that were not enough, the authorities did not recover this money in income taxes. Interventionism was therefore only assumed to increase the deficit.

The politicians liked the idea, which we can see until now: MPs like to vote for social benefits for voters, because they repay them with votes on election day.

Kruszec is just a problem

However, if a country has to run into debt over and over again, this is incompatible with a bullion system in which the circulation of money is dependent on gold resources. There was a reason the 1930s brought an end to the zloty and started countries’ path towards fiat currencies. From then on, public debt became the cover for the currency.

Anyway, the USA consciously began to devalue its currency. In May 1933, the Congress passed the so-called Thomas amendment. This authorized the government to devalue the dollar by 50 percent. Even at this stage, they did not want to artificially reduce the value of money – in this way they only wanted to force citizens to buy… everything and get rid of the currency, which would cause inflation.

Then the Americans, in fact, very frightened, rushed to the shops. Only the madness lasted quite a short time. In response, in the fall, the intention to devalue the dollar was announced, but without giving a limit (i.e. in practice, Congress could devalue the dollar by up to 90%). This time it was enough: US citizens rushed to the stores and provoked inflation.

Finally, on January 21, 1934, the dollar was devalued by as much as 40 percent. The convertibility of the currency into gold was suspended almost simultaneously. Not only that, everyone – both private individuals and banks – had to sell their gold to the state. Subsequently, a law was enacted that limited the ability of US citizens to purchase crushed stone.

However, it still didn’t really help. The situation was “saved” only by the most terrible conflict in the 20th century …


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