The Great Depression: Misunderstanding Deflation

Abstract

The core problem of both the Great Depression and the 2008/2009 economic crisis was deflation. A review of the Great Depression examines the long, slow intellectual and political process that finally led to a correct understanding of how deflation arose and the difficulty of addressing it with the proper policies. Greater knowledge of this intellectual and economic history would have saved the country from much unnecessary pain following the more recent economic crisis.

Keywords: Great Depression, Franklin Roosevelt, Irving Fisher, John Maynard Keynes, Lauchlin Currie, Benjamin Strong

JEL Classification: B22, E32, E52, E58, E59, E62, E65, N20