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105-574: The rink opened in 1905, and represents the long and rich story of a roller skating rink that survived the civil strife of the 1950-60s, development overtures and the musical whims of generations to become a rink gifted for perpetuity. Today, the Oaks Skating Rink remains America's largest and oldest under the umbrella of the Oaks Park Association, a nonprofit organization that manages both the rink and park attractions. During

210-634: A deflationary spiral started in 1931. Farmers faced a worse outlook; declining crop prices and a Great Plains drought crippled their economic outlook. At its peak, the Great Depression saw nearly 10% of all Great Plains farms change hands despite federal assistance. At first, the decline in the U.S. economy was the factor that triggered economic downturns in most other countries due to a decline in trade, capital movement, and global business confidence. Then, internal weaknesses or strengths in each country made conditions worse or better. For example,

315-603: A lender of last resort (LLR), this might result in a moral hazard problem, with the private sector becoming lax and this may even exacerbate the problem. Many economists therefore assert that the LLR must only be employed in extreme cases and must be a discretion of the government rather than a rule. Some economists argue that financial liberalization and increased inflows of foreign capital, especially if short term, can aggravate illiquidity of banks and increase their vulnerability. In this context, 'International Illiquidity' refers to

420-418: A silver standard , almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries . This partly explains why the experience and length of the depression differed between regions and states around

525-437: A depositor will only withdraw when it is appropriate for him to do so under optimal risk-sharing. However, if agents panic, their incentives are distorted and in such an equilibrium, all depositors withdraw their deposits. Since liquidated assets are sold at a loss, therefore in this scenario, a bank will liquidate all its assets, even if not all depositors withdraw. Note that the underlying reason for withdrawals by depositors in

630-417: A flight to liquidity occurred during the 1998 Russian financial crisis , when the price of Treasury bonds sharply rose relative to less liquid debt instruments. This resulted in widening of credit spreads and major losses at Long-Term Capital Management and many other hedge funds. There exists scope for government policy to alleviate a liquidity crunch, by absorbing less liquid assets and in turn providing

735-604: A former privately run bank, bearing no relation to the U.S. government (not to be confused with the Federal Reserve ). Unable to pay out to all of its creditors, the bank failed. Among the 608 American banks that closed in November and December 1930, the Bank of United States accounted for a third of the total $ 550 million deposits lost and, with its closure, bank failures reached a critical mass. In an initial response to

840-467: A greater reduction in credit. On 5 April 1933, President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates , coins and bullion illegal, reducing the pressure on Federal Reserve gold. British economist John Maynard Keynes argued in The General Theory of Employment, Interest and Money that lower aggregate expenditures in the economy contributed to

945-411: A liquidity crisis (elaborated below). One of the mechanisms, that can work to amplify the effects of a small negative shock to the economy, is the balance sheet mechanism . Under this mechanism, a negative shock in the financial market lowers asset prices and erodes the financial institution's capital, thus worsening its balance sheet. Consequently, two liquidity spirals come into effect, which amplify

1050-502: A liquidity crisis. Market participants in need of cash find it hard to locate potential trading partners to sell their assets . This may result either due to limited market participation or because of a decrease in cash held by financial market participants . Thus asset holders may be forced to sell their assets at a price below the long term fundamental price. Borrowers typically face higher loan costs and collateral requirements, compared to periods of ample liquidity, and unsecured debt

1155-610: A live pipe organ, as of 2009. The roller rink has an annex, separate from the main rink, in a detached building roughly 200 feet east (and behind) the public rink. The oval flat track is used by the Rose City Rollers (women's roller derby) for practice and some tournaments. The current Theatre Organ is a 4-manual, 18-rank Wurlitzer from the Broadway Theatre, Portland. It was built for the theatre in 1926 and moved to The Oaks in 1955. The first organ at The Oaks

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1260-464: A market to be liquid if it can absorb "liquidity trades" (sale of securities by investors to meet sudden needs for cash) without large changes in price. This shortage of liquidity could reflect a fall in asset prices below their long run fundamental price, deterioration in external financing conditions, reduction in the number of market participants, or simply difficulty in trading assets. The above-mentioned forces mutually reinforce each other during

1365-661: A massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment. Liquidity crisis In financial economics , a liquidity crisis is an acute shortage of liquidity . Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrowers can obtain external funding), or accounting liquidity (the health of an institution's balance sheet measured in terms of its cash-like assets). Additionally, some economists define

1470-600: A modern industrial city handled shortages of money and resources. Often they updated strategies their mothers used when they were growing up in poor families. Cheap foods were used, such as soups, beans and noodles. They purchased the cheapest cuts of meat—sometimes even horse meat—and recycled the Sunday roast into sandwiches and soups. They sewed and patched clothing, traded with their neighbors for outgrown items, and made do with colder homes. New furniture and appliances were postponed until better days. Many women also worked outside

1575-402: A monetary contraction first-hand were forced to join the deflationary policy since higher interest rates in countries that performed a deflationary policy led to a gold outflow in countries with lower interest rates. Under the gold standard's price–specie flow mechanism , countries that lost gold but nevertheless wanted to maintain the gold standard had to permit their money supply to decrease and

1680-457: A pivotal role in amplifying the effects of a drop in property prices. Many asset prices drop significantly during liquidity crises. Hence, asset prices are subject to liquidity risk and risk-averse investors naturally require higher expected return as compensation for this risk. The liquidity-adjusted CAPM pricing model therefore states that, the higher an asset's market-liquidity risk, the higher its required return. Liquidity crises such as

1785-567: A serious issue in the 1930s. Support for increasing welfare programs during the depression included a focus on women in the family. The Conseil Supérieur de la Natalité campaigned for provisions enacted in the Code de la Famille (1939) that increased state assistance to families with children and required employers to protect the jobs of fathers, even if they were immigrants. In rural and small-town areas, women expanded their operation of vegetable gardens to include as much food production as possible. In

1890-528: A situation in which a country's short-term financial obligations denominated in foreign/hard currency exceed the amount of foreign/hard currency that it can obtain on a short notice. Empirical evidence reveals that weak fundamentals alone cannot account for all foreign capital outflows, especially from emerging markets . Open economy extensions of the Diamond–Dybvig Model, where runs on domestic deposits interact with foreign creditor panics (depending on

1995-480: A small cadre of Labour, but the vast majority of Labour leaders denounced MacDonald as a traitor for leading the new government. Britain went off the gold standard , and suffered relatively less than other major countries in the Great Depression. In the 1931 British election, the Labour Party was virtually destroyed, leaving MacDonald as prime minister for a largely Conservative coalition. In most countries of

2100-713: A standstill agreement froze Germany's foreign liabilities for six months. Germany received emergency funding from private banks in New York as well as the Bank of International Settlements and the Bank of England. The funding only slowed the process. Industrial failures began in Germany, a major bank closed in July and a two-day holiday for all German banks was declared. Business failures were more frequent in July, and spread to Romania and Hungary. The crisis continued to get worse in Germany, bringing political upheaval that finally led to

2205-521: Is flight to liquidity as investors exit illiquid investments and turn to secondary markets in pursuit of cash–like or easily saleable assets. Empirical evidence points towards widening price differentials, during periods of liquidity shortage, among assets that are otherwise alike, but differ in terms of their asset market liquidity. For instance, there are often large liquidity premia (in some cases as much as 10–15%) in Treasury bond prices. An example of

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2310-658: Is a consensus that the Federal Reserve System should have cut short the process of monetary deflation and banking collapse, by expanding the money supply and acting as lender of last resort . If they had done this, the economic downturn would have been far less severe and much shorter. Modern mainstream economists see the reasons in Insufficient spending, the money supply reduction, and debt on margin led to falling prices and further bankruptcies ( Irving Fisher 's debt deflation). The monetarist explanation

2415-404: Is nearly impossible to obtain. Typically, during a liquidity crisis, the interbank lending market does not function smoothly either. Several mechanisms operating through the mutual reinforcement of asset market liquidity and funding liquidity can amplify the effects of a small negative shock to the economy and result in a lack of liquidity and eventually a full-blown financial crisis . One of

2520-429: Is one that entails suspension of convertibility when there are too many withdrawals. For instance, consider a contract which is identical to the pure demand deposit contract, except that it states that a depositor will not receive anything on a given date if he attempts to prematurely withdraw, after a certain fraction of the bank's total deposits have been withdrawn. Such a contract has a unique Nash equilibrium which

2625-417: Is stable and achieves optimal risk sharing. Expost policy intervention: Some experts suggest that the central bank should provide downside insurance in the event of a liquidity crisis. This could take the form of direct provision of insurance to asset-holders against losses or a commitment to purchasing assets in the event that the asset price falls below a threshold. Such 'asset purchases' will help drive up

2730-493: Is supported by the contrast in how the crisis progressed in, e.g., Britain, Argentina and Brazil, all of which devalued their currencies early and returned to normal patterns of growth relatively rapidly and countries which stuck to the gold standard , such as France or Belgium. Frantic attempts by individual countries to shore up their economies through protectionist policies – such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries – exacerbated

2835-539: The 1932 election , Hoover was defeated by Franklin D. Roosevelt , who from 1933 pursued a series of " New Deal " policies and programs to provide relief and create jobs, including the Civilian Conservation Corps , Federal Emergency Relief Administration , Tennessee Valley Authority , and Works Progress Administration . Historians disagree on the effects of the New Deal, with some claiming that

2940-635: The Great Depression , admission prices were reduced so families could better afford skating. Additionally the park owner, Edward Bollinger, started the Junior Roller Skating Club which skated on Sunday afternoons. This led to the largest number of active roller skaters ever at Oaks Park Skating Rink. Built in a flood plain, in 1948, water damage from the same flood that destroyed Vanport required five months to repair. During rebuilding, engineers installed iron barrels under

3045-582: The New York Bank of United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. Friedman and Schwartz argued that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of

3150-539: The coming to power of Hitler's Nazi regime in January 1933. The world financial crisis now began to overwhelm Britain; investors around the world started withdrawing their gold from London at the rate of £2.5 million per day. Credits of £25 million each from the Bank of France and the Federal Reserve Bank of New York and an issue of £15 million fiduciary note slowed, but did not reverse,

3255-547: The financial crisis of 2007–2008 and the LTCM crisis of 1998 also result in deviations from the Law of one price , meaning that almost identical securities trade at different prices. This happens when investors are financially constrained and liquidity spirals affect more securities that are difficult to borrow against. Hence, a security's margin requirement can affect its value. A phenomenon frequently observed during liquidity crises

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3360-572: The financial innovation bandwagon, often before they can fully apprehend the risks associated with new financial assets. Unexpected behaviour of such new financial assets can lead to market participants disengaging from risks they don't understand and investing in more liquid or familiar assets. This can be described as the information amplification mechanism . In the subprime mortgage crisis , rapid endorsement and later abandonment of complicated structured finance products such as collateralized debt obligations , mortgage-backed securities , etc. played

3465-489: The "loss spiral". At the same time, lending standards and margins tighten, leading to the "margin spiral". Both these effects cause the borrowers to engage in a fire sale , lowering prices and deteriorating external financing conditions. Apart from the "balance sheet mechanism" described above, the lending channel can also dry up for reasons exogenous to the borrower's credit worthiness . For instance, banks may become concerned about their future access to capital markets in

3570-447: The 1937 recession that interrupted it). The common view among most economists is that Roosevelt's New Deal policies either caused or accelerated the recovery, although his policies were never aggressive enough to bring the economy completely out of recession. Some economists have also called attention to the positive effects from expectations of reflation and rising nominal interest rates that Roosevelt's words and actions portended. It

3675-813: The British crisis. The financial crisis now caused a major political crisis in Britain in August 1931. With deficits mounting, the bankers demanded a balanced budget; the divided cabinet of Prime Minister Ramsay MacDonald's Labour government agreed; it proposed to raise taxes, cut spending, and most controversially, to cut unemployment benefits 20%. The attack on welfare was unacceptable to the Labour movement. MacDonald wanted to resign, but King George V insisted he remain and form an all-party coalition " National Government ". The Conservative and Liberals parties signed on, along with

3780-530: The Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts. During World War I many countries suspended their gold standard in varying ways. There was high inflation from WWI, and in the 1920s in the Weimar Republic , Austria , and throughout Europe. In the late 1920s there

3885-458: The Diamond–Dybvig model is a shift in expectations . Alternatively, a bank run may occur because bank's assets, which are liquid but risky, no longer cover the nominally fixed liability (demand deposits), and depositors therefore withdraw quickly to minimize their potential losses. The model also provides a suitable framework for analysis of devices that can be used to contain and even prevent

3990-521: The Dow returning to 294 (pre-depression levels) in April 1930, before steadily declining for years, to a low of 41 in 1932. At the beginning, governments and businesses spent more in the first half of 1930 than in the corresponding period of the previous year. On the other hand, consumers, many of whom suffered severe losses in the stock market the previous year, cut expenditures by 10%. In addition, beginning in

4095-489: The Federal Reserve did not act to limit the decline of the money supply was the gold standard . At that time, the amount of credit the Federal Reserve could issue was limited by the Federal Reserve Act , which required 40% gold backing of Federal Reserve Notes issued. By the late 1920s, the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit

4200-442: The Great Depression is right, or the traditional Keynesian explanation that a fall in autonomous spending, particularly investment, is the primary explanation for the onset of the Great Depression. Today there is also significant academic support for the debt deflation theory and the expectations hypothesis that – building on the monetary explanation of Milton Friedman and Anna Schwartz – add non-monetary explanations. There

4305-642: The Great Depression. According to the U.S. Senate website, the Smoot–Hawley Tariff Act is among the most catastrophic acts in congressional history. Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. Most historians and economists blame the Act for worsening the depression by seriously reducing international trade and causing retaliatory tariffs in other countries. While foreign trade

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4410-481: The New Deal prolonged the Great Depression, as they argue that National Industrial Recovery Act of 1933 and National Labor Relations Act of 1935 restricted competition and established price fixing. John Maynard Keynes did not think that the New Deal under Roosevelt single-handedly ended the Great Depression: "It is, it seems, politically impossible for a capitalistic democracy to organize expenditure on

4515-544: The U.K. economy, which experienced an economic downturn throughout most of the late 1920s, was less severely impacted by the shock of the depression than the U.S. By contrast, the German economy saw a similar decline in industrial output as that observed in the U.S. Some economic historians attribute the differences in the rates of recovery and relative severity of the economic decline to whether particular countries had been able to effectively devaluate their currencies or not. This

4620-490: The U.S. unemployment rate down below 10%. World War II had a dramatic effect on many parts of the American economy. Government-financed capital spending accounted for only 5% of the annual U.S. investment in industrial capital in 1940; by 1943, the government accounted for 67% of U.S. capital investment. The massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending

4725-685: The United States, agricultural organizations sponsored programs to teach housewives how to optimize their gardens and to raise poultry for meat and eggs. Rural women made feed sack dresses and other items for themselves and their families and homes from feed sacks. In American cities, African American women quiltmakers enlarged their activities, promoted collaboration, and trained neophytes. Quilts were created for practical use from various inexpensive materials and increased social interaction for women and promoted camaraderie and personal fulfillment. Oral history provides evidence for how housewives in

4830-543: The United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–36. According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, The UK and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had

4935-638: The Wall Street crash, after which the slide continued for three years, which was accompanied by a loss of confidence in the financial system. By 1933, the U.S. unemployment rate had risen to 25 percent, about one-third of farmers had lost their land, and about half of the country's 25,000 banks had gone out of business. Many people, unable to pay mortgages or rent, became homeless and relied on begging or charities to feed themselves. The U.S. federal government initially did little to help. President Herbert Hoover , like many of his fellow Republicans , believed in

5040-456: The bank failing. This can lead to failure of even 'healthy' banks and eventually an economy-wide contraction of liquidity, resulting in a full blown financial crisis. Diamond and Dybvig demonstrate that when banks provide pure demand deposit contracts, we can actually have multiple equilibria. If confidence is maintained, such contracts can actually improve on the competitive market outcome and provide better risk sharing. In such an equilibrium,

5145-425: The banks of advanced economies, which typically have a number of potential investors in the world capital markets, informational frictions imply that investors in emerging markets are 'fair weather friends'. Thus self – fulfilling panics akin to those observed during a bank run, are much more likely for these economies. Moreover, policy distortions in these countries work to magnify the effects of adverse shocks. Given

5250-460: The banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did. With significantly less money to go around, businesses could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch . One reason why

5355-573: The beginning of the Depression. The Depression was preceded by a period of industrial growth and social development known as the " Roaring Twenties ". Much of the profit generated by the boom was invested in speculation , such as on the stock market , which resulted in growing wealth inequality . Banks were subject to minimal regulation under laissez-faire economic policies, resulting in loose lending and widespread debt. By 1929, declining spending had led to reductions in manufacturing output and rising unemployment . Share values continued to rise until

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5460-465: The behavior of housewives. The common view among economic historians is that the Great Depression ended with the advent of World War II . Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression, though some consider that it did not play a very large role in the recovery, though it did help in reducing unemployment. The rearmament policies leading up to World War II helped stimulate

5565-462: The collapse in global trade, contributing to the depression. By 1933, the economic decline pushed world trade to one third of its level compared to four years earlier. While the precise causes for the occurrence of the Great depression are disputed and can be traced to both global and national phenomena, its immediate origins are most conveniently examined in the context of the U.S. economy, from which

5670-475: The crash was a mere symptom of more general economic trends of the time, which had already been underway in the late 1920s. A contrasting set of views, which rose to prominence in the later part of the 20th century, ascribes a more prominent role to failures of monetary policy . According to those authors, while general economic trends can explain the emergence of the downturn, they fail to account for its severity and longevity; they argue that these were caused by

5775-421: The credit supply through such lending facilities with low margin requirements is an important second monetary tool (in addition to the interest rate tool), which can raise asset prices, lower bond yields, and ease the funding problems in the financial system during crises. While there are such benefits of intervention, there is also costs. It is argued by many economists that if the central bank declares itself as

5880-625: The crisis, the U.S. Congress passed the Smoot–Hawley Tariff Act on 17 June 1930. The Act was ostensibly aimed at protecting the American economy from foreign competition by imposing high tariffs on foreign imports. The consensus view among economists and economic historians (including Keynesians , Monetarists and Austrian economists ) is that the passage of the Smoot–Hawley Tariff had, in fact, achieved an opposite effect to what

5985-633: The decade. The Depression had devastating economic effects on both wealthy and poor countries: all experienced drops in personal income , prices ( deflation ), tax revenues, and profits. International trade fell by more than 50%, and unemployment in some countries rose as high as 33%. Cities around the world , especially those dependent on heavy industry , were heavily affected. Construction virtually halted in many countries, and farming communities and rural areas suffered as crop prices fell by up to 60%. Faced with plummeting demand and few job alternatives, areas dependent on primary sector industries suffered

6090-414: The demand and consequently the price of the asset in question, thereby easing the liquidity shortage faced by borrowers. Alternatively, the government could provide 'deposit insurance', where it guarantees that a promised return will be paid to all those who withdraw. In the framework of the Diamond–Dybvig model, demand deposit contracts with government deposit insurance help achieve the optimal equilibrium if

6195-408: The depression. Not all governments enforced the same measures of protectionism. Some countries raised tariffs drastically and enforced severe restrictions on foreign exchange transactions, while other countries reduced "trade and exchange restrictions only marginally": The gold standard was the primary transmission mechanism of the Great Depression. Even countries that did not face bank failures and

6300-435: The domestic price level to decline ( deflation ). There is also consensus that protectionist policies, and primarily the passage of the Smoot–Hawley Tariff Act , helped to exacerbate, or even cause the Great Depression. Some economic studies have indicated that the rigidities of the gold standard not only spread the downturn worldwide, but also suspended gold convertibility (devaluing the currency in gold terms) that did

6405-402: The drop in demand. Monetarists believe that the Great Depression started as an ordinary recession, but the shrinking of the money supply greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Economists and economic historians are almost evenly split as to whether the traditional monetary explanation that monetary forces were the primary cause of

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6510-401: The earliest and most influential models of liquidity crisis and bank runs was given by Diamond and Dybvig in 1983. The Diamond–Dybvig model demonstrates how financial intermediation by banks, performed by accepting assets that are inherently illiquid and offering liabilities which are much more liquid (offer a smoother pattern of returns), can make banks vulnerable to a bank run . Emphasizing

6615-443: The early 1930s with the popularity of sound films . It was relocated to Oaks Park skating rink in 1955. The organ is described by Oregon Public Broadcasting 's April Bauer as "an impossible-looking hulk the size of a semi truck, hanging about twenty feet above the rink floor". Keith Fortune has served as the rink's organist and "unofficial curator". The rink is the world's only location where visitors can skate to music provided by

6720-427: The economies of Europe in 1937–1939. By 1937, unemployment in Britain had fallen to 1.5 million. The mobilization of manpower following the outbreak of war in 1939 ended unemployment. The American mobilization for World War II at the end of 1941 moved approximately ten million people out of the civilian labor force and into the war. This finally eliminated the last effects from the Great Depression and brought

6825-576: The end of the month. A large sell-off of stocks began in mid-October. Finally, on 24 October, Black Thursday , the American stock market crashed 11% at the opening bell. Actions to stabilize the market failed, and on 28 October, Black Monday, the market crashed another 12%. The panic peaked the next day on Black Tuesday, when the market saw another 11% drop. Thousands of investors were ruined, and billions of dollars had been lost; many stocks could not be sold at any price. The market recovered 12% on Wednesday but by then significant damage had been done. Though

6930-567: The event of a negative shock and may engage in precautionary hoarding of funds. This would result in reduction of funds available in the economy and a slowdown in economic activity. Additionally, the fact that most financial institutions are simultaneously engaged in lending and borrowing can give rise to a network effect . In a setting that involves multiple parties, a gridlock can occur when concerns about counterparty credit risk result in failure to cancel out offsetting positions. Each party then has to hold additional funds to protect itself against

7035-500: The explanations of the Keynesians and monetarists. The consensus among demand-driven theories is that a large-scale loss of confidence led to a sudden reduction in consumption and investment spending. Once panic and deflation set in, many people believed they could avoid further losses by keeping clear of the markets. Holding money became profitable as prices dropped lower and a given amount of money bought ever more goods, exacerbating

7140-503: The few women in the labor force, layoffs were less common in the white-collar jobs and they were typically found in light manufacturing work. However, there was a widespread demand to limit families to one paid job, so that wives might lose employment if their husband was employed. Across Britain, there was a tendency for married women to join the labor force, competing for part-time jobs especially. In France, very slow population growth, especially in comparison to Germany continued to be

7245-505: The first week of June, 540 million in the second, and 150 million in two days, 19–20 June. Collapse was at hand. U.S. President Herbert Hoover called for a moratorium on payment of war reparations . This angered Paris, which depended on a steady flow of German payments, but it slowed the crisis down, and the moratorium was agreed to in July 1931. An International conference in London later in July produced no agreements but on 19 August

7350-476: The government imposes an optimal tax to finance the deposit insurance. Alternative mechanisms through which the central bank could intervene are direct injection of equity into the system in the event of a liquidity crunch or engaging in a debt for equity swap . It could also lend through the discount window or other lending facilities, providing credit to distressed financial institutions on easier terms. Ashcraft, Garleanu, and Pedersen (2010) argue that controlling

7455-606: The government tried to reshape private household consumption under the Four-Year Plan of 1936 to achieve German economic self-sufficiency. The Nazi women's organizations, other propaganda agencies and the authorities all attempted to shape such consumption as economic self-sufficiency was needed to prepare for and to sustain the coming war. The organizations, propaganda agencies and authorities employed slogans that called up traditional values of thrift and healthy living. However, these efforts were only partly successful in changing

7560-519: The home, or took boarders, did laundry for trade or cash, and did sewing for neighbors in exchange for something they could offer. Extended families used mutual aid—extra food, spare rooms, repair-work, cash loans—to help cousins and in-laws. In Japan, official government policy was deflationary and the opposite of Keynesian spending. Consequently, the government launched a campaign across the country to induce households to reduce their consumption, focusing attention on spending by housewives. In Germany,

7665-440: The impact of the initial negative shock. In an attempt to maintain its leverage ratio , the financial institution must sell its assets, precisely at a time when their price is low. Thus, assuming that asset prices depend on the health of investors' balance sheet, erosion of investors' net worth further reduces asset prices, which feeds back into their balance sheet and so on. This is what Brunnermeier and Pedersen (2008) term as

7770-527: The initial crisis spread to the rest of the world. In the aftermath of World War I , the Roaring Twenties brought considerable wealth to the United States and Western Europe. Initially, the year 1929 dawned with good economic prospects: despite a minor crash on 25 March 1929, the market seemed to gradually improve through September. Stock prices began to slump in September, and were volatile at

7875-563: The lack of an adequate response to the crises of liquidity that followed the initial economic shock of 1929 and the subsequent bank failures accompanied by a general collapse of the financial markets. After the Wall Street Crash of 1929 , when the Dow Jones Industrial Average dropped from 381 to 198 over the course of two months, optimism persisted for some time. The stock market rose in early 1930, with

7980-521: The market entered a period of recovery from 14 November until 17 April 1930, the general situation had been a prolonged slump. From 17 April 1930 until 8 July 1932, the market continued to lose 89% of its value. Despite the crash, the worst of the crisis did not reverberate around the world until after 1929. The crisis hit panic levels again in December 1930, with a bank run on the Bank of United States ,

8085-522: The maturity of the foreign debt and the possibility of international default), offer a plausible explanation for the financial crises that were observed in Mexico, East Asia, Russia etc. These models assert that international factors can play a particularly important role in increasing domestic financial vulnerability and likelihood of a liquidity crisis. The onset of capital outflows can have particularly destabilising consequences for emerging markets. Unlike

8190-414: The mid-1930s, a severe drought ravaged the agricultural heartland of the U.S. Interest rates dropped to low levels by mid-1930, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment remained low. By May 1930, automobile sales declined to below the levels of 1928. Prices, in general, began to decline, although wages held steady in 1930. Then

8295-423: The monetary base and by not injecting liquidity into the banking system to prevent it from crumbling, the Federal Reserve passively watched the transformation of a normal recession into the Great Depression. Friedman and Schwartz argued that the downward turn in the economy, starting with the stock market crash, would merely have been an ordinary recession if the Federal Reserve had taken aggressive action. This view

8400-502: The most to make recovery possible. Every major currency left the gold standard during the Great Depression. The UK was the first to do so. Facing speculative attacks on the pound and depleting gold reserves , in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets. Japan and the Scandinavian countries followed in 1931. Other countries, such as Italy and

8505-427: The most. The outbreak of World War II in 1939 ended the Depression, as it stimulated factory production, providing jobs for women as militaries absorbed large numbers of young, unemployed men. The precise causes for the Great Depression are disputed. One set of historians, for example, focuses on non-monetary economic causes. Among these, some regard the Wall Street crash itself as the main cause; others consider that

8610-582: The need to balance the national budget and was unwilling to implement expensive welfare spending . In 1930, Hoover signed the Smoot–Hawley Tariff Act , which taxed imports with the intention of encouraging buyers to purchase American products, which worsened the Depression because foreign governments retaliated with tariffs on American exports. In 1932, Hoover established the Reconstruction Finance Corporation , which offered loans to businesses and support to local governments. In

8715-483: The physical volume of exports fall, but also the prices fell by about 1 ⁄ 3 as written. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. Governments around the world took various steps into spending less money on foreign goods such as: "imposing tariffs, import quotas, and exchange controls". These restrictions triggered much tension among countries that had large amounts of bilateral trade, causing major export-import reductions during

8820-480: The policies prolonged the Depression instead of shortening it. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%; in the U.S., the Depression resulted in a 30% contraction in GDP. Recovery varied greatly around the world. Some economies, such as the U.S., Germany and Japan started to recover by the mid-1930s; others, like France, did not return to pre-shock growth rates until later in

8925-459: The political situation in Europe. In their book, A Monetary History of the United States , Milton Friedman and Anna J. Schwartz also attributed the recovery to monetary factors, and contended that it was much slowed by poor management of money by the Federal Reserve System . Chairman of the Federal Reserve (2006–2014) Ben Bernanke agreed that monetary factors played important roles both in

9030-591: The private sector with more liquid government – backed assets, through the following channels: Pre-emptive or ex-ante policy: Imposition of minimum equity -to- capital requirements or ceilings on debt-to-equity ratio on financial institutions other than commercial banks would lead to more resilient balance sheets. In the context of the Diamond–Dybvig model , an example of a demand deposit contract that mitigates banks' vulnerability to bank runs, while allowing them to be providers of liquidity and optimal risk sharing,

9135-479: The rink floor so it could float above flooding waters in the future. The rink flooded again in the Christmas flood of 1964 but it suffered some damage because workers could not immediately access the rink due to 8 feet (2.4 m) of flooding waters in the park. A day later and after four hours of effort, they severed the floor supports to allow it to float. Dale and Jeanne Pritchard were longtime instructors at

9240-515: The rink. The rink has served as a location for several films and TV shows including Grimm , Portlandia , Leverage , Breaking In and Untraceable . In addition, the rink also appeared in Free Willy as the exterior to the tank where Willy was held captive. In 2017, Damian Lillard and Adidas released a version of his "Dame 4" shoe, called "Glow in the Park", which was inspired by

9345-459: The rink. Today, the Oaks Rink carries the tagline "Skaters Paradise" to accompany its 100 x 200 square foot (20,000 sq ft skating surface) Michigan maple floor and the last live Wurlitzer pipe organ to operate in a U.S. roller rink. From 1905 until an organ was installed, a live orchestra played from the balcony above the skating rink. In 1922, a William Woods (a local builder) theatre organ

9450-414: The risks that are not netted out, reducing liquidity in the market. These mechanisms may explain the 'gridlock' observed in the interbank lending market during the recent subprime crisis, when banks were unwilling to lend to each other and instead hoarded their reserves. Besides, a liquidity crisis may even result due to uncertainty associated with market activities. Typically, market participants jump on

9555-467: The role played by demand deposit contracts in providing liquidity and better risk sharing among people, they argue that such a demand deposit contract has a potential undesirable equilibrium where all depositors panic and withdraw their deposits immediately. This gives rise to self-fulfilling panics among depositors, as we observe withdrawals by even those depositors who would have actually preferred to leave their deposits in, if they were not concerned about

9660-434: The scale necessary to make the grand experiments which would prove my case—except in war conditions." According to Christina Romer , the money supply growth caused by huge international gold inflows was a crucial source of the recovery of the United States economy, and that the economy showed little sign of self-correction. The gold inflows were partly due to devaluation of the U.S. dollar and partly due to deterioration of

9765-476: The world, recovery from the Great Depression began in 1933. In the U.S., recovery began in early 1933, but the U.S. did not return to 1929 GNP for over a decade and still had an unemployment rate of about 15% in 1940, albeit down from the high of 25% in 1933. There is no consensus among economists regarding the motive force for the U.S. economic expansion that continued through most of the Roosevelt years (and

9870-673: The world. The financial crisis escalated out of control in mid-1931, starting with the collapse of the Credit Anstalt in Vienna in May. This put heavy pressure on Germany, which was already in political turmoil. With the rise in violence of National Socialist ('Nazi') and Communist movements, as well as investor nervousness at harsh government financial policies, investors withdrew their short-term money from Germany as confidence spiraled downward. The Reichsbank lost 150 million marks in

9975-778: The worldwide economic decline and eventual recovery. Bernanke also saw a strong role for institutional factors, particularly the rebuilding and restructuring of the financial system, and pointed out that the Depression should be examined in an international perspective. Women's primary role was as housewives; without a steady flow of family income, their work became much harder in dealing with food and clothing and medical care. Birthrates fell everywhere, as children were postponed until families could financially support them. The average birthrate for 14 major countries fell 12% from 19.3 births per thousand population in 1930, to 17.0 in 1935. In Canada, half of Roman Catholic women defied Church teachings and used contraception to postpone births. Among

10080-560: Was a 2-manual, 5-rank William Woods (a local builder), which was expanded to a 4-manual, 13-rank instrument, which is now in a Newport, Oregon in the home of member Arthur Allen. Prior to the Woods organ, a live orchestra played from above the rink floor. The Wurlitzer has had the Dulciana removed and replaced with a Gamba, and a Robert-Morton Post Horn was added. The relays are all original. Great Depression The Great Depression

10185-658: Was a scramble to deflate prices to get the gold standard's conversation rates back on track to pre-WWI levels, by causing deflation and high unemployment through monetary policy. In 1933 FDR signed Executive Order 6102 and in 1934 signed the Gold Reserve Act . The two classic competing economic theories of the Great Depression are the Keynesian (demand-driven) and the Monetarist explanation. There are also various heterodox theories that downplay or reject

10290-505: Was a severe global economic downturn from 1929 to 1939. The period was characterized by high rates of unemployment and poverty; drastic reductions in liquidity , industrial production, and trade; and widespread bank and business failures around the world. The economic contagion began in 1929 in the United States , the largest economy in the world, with the devastating Wall Street stock market crash of October 1929 often considered

10395-478: Was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries. The average ad valorem (value based) rate of duties on dutiable imports for 1921–1925 was 25.9% but under the new tariff it jumped to 50% during 1931–1935. In dollar terms, American exports declined over the next four years from about $ 5.2 billion in 1929 to $ 1.7 billion in 1933; so, not only did

10500-474: Was endorsed in 2002 by Federal Reserve Governor Ben Bernanke in a speech honoring Friedman and Schwartz with this statement: Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression, you're right. We did it. We're very sorry. But thanks to you, we won't do it again. The Federal Reserve allowed some large public bank failures – particularly that of

10605-426: Was given by American economists Milton Friedman and Anna J. Schwartz . They argued that the Great Depression was caused by the banking crisis that caused one-third of all banks to vanish, a reduction of bank shareholder wealth and more importantly monetary contraction of 35%, which they called "The Great Contraction ". This caused a price drop of 33% ( deflation ). By not lowering interest rates, by not increasing

10710-500: Was in the form of Federal Reserve demand notes. A "promise of gold" is not as good as "gold in the hand", particularly when they only had enough gold to cover 40% of the Federal Reserve Notes outstanding. During the bank panics, a portion of those demand notes was redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by

10815-510: Was installed. It began as a 2/5: two manuals and five ranks (rows of 61 pipes of similar timbre, each one a different size and pitch) and eventually became a 4/18. It was moved to a military base's roller rink in 1955; as of 2003 it was in a private home in Newport, Oregon. Some parts may have been retained at Oaks Park. The current pipe organ was originally installed in 1926 at Portland's Broadway Theater, but had fallen into disuse since

10920-446: Was intended. It exacerbated the Great Depression by preventing economic recovery after domestic production recovered, hampering the volume of trade; still there is disagreement as to the precise extent of the Act's influence. In the popular view, the Smoot–Hawley Tariff was one of the leading causes of the depression. In a 1995 survey of American economic historians, two-thirds agreed that the Smoot–Hawley Tariff Act at least worsened

11025-470: Was the rollback of those same reflationary policies that led to the interruption of a recession beginning in late 1937. One contributing policy that reversed reflation was the Banking Act of 1935 , which effectively raised reserve requirements, causing a monetary contraction that helped to thwart the recovery. GDP returned to its upward trend in 1938. A revisionist view among some economists holds that

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