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Home , Recession

Keynesian

By Abigail March Period 1 Major Topics

▪ The Recession of 1937-38 ▪ and its impacts ▪ Wagner-Steagall Housing Act and Fair Labor Standards Act

Recession of 1937

▪ An economic downturn that occurred during the in the . ▪ Lasted from May of 1937 to June of 1938 ▪ Americas third worst recession in the twentieth century. Real GDP fell 11% and industrial production fell 32% ▪ “The recession within the Depression.” Recession of 1937 theory 1

▪ In 1936, the Roosevelt Administration began to worry about the potential of inflation. ▪ The Treasury Department responded by directing the incoming gold holdings away from the . This caused the monetary base to freeze. Recession of 1937 theory 1

▪ The economy began its downturn in the spring of 1937 and plummeted during the following fall. The Treasury Department realized their mistake and redirected the gold back to the Federal Reserve and the economy began its recovery in the summer of 1938. ▪ It is thought that the reasoning behind the decision of the Treasury Department was because there was a fear among the people that the of the dollar would be decreased. Recession of 1937 theory 2

▪ Another possible reason behind the Recession of 1937 is the contraction in the supply caused by policies and contractionary fiscal policies in addition to Federal Reserve and Treasury Department decisions. ▪ In 1936, to prevent an “injurious expansion,” Federal policymakers doubled reserve requirement ratios to soak up banks’ excess reserves, which is money above the amount banks were required to hold as a fraction of customers’ deposits, by creating the Revenue Act of 1935 . Recession of 1937 theory 2

▪ While this was put in place so was the Treasury Departments decision to route the gold away from the Federal Reserve. ▪ People who agree with this viewpoint believe that both had a large impact upon the economy decay, not solely the Treasury Departments mistake Keynesian Economic Theory

▪ Created by the British , Keynesian economics is a theory of total spending in the economy, called aggregate , and its effects on output and inflation. ▪ A Keynesian believer agrees that is influenced by a host of economic decisions—both public and private—and sometimes behaves erratically. The public decisions include, most prominently, those on monetary and fiscal (i.e., spending and ) policies. ▪ According to Keynesian theory, changes in aggregate demand, whether anticipated or unanticipated, have their greatest -run effect on real output and , not on . Keynesian Economic Theory

▪ A l0t of people who agree with the Keynesian Economic Theory – are more concerned about combating than about conquering inflation. – Think that prices, and especially , respond slowly to changes in , resulting in periodic and surpluses, especially of labor. Keynesian Economic Theory

▪ Unfortunately it was rejected by Roosevelt. ▪ The Second World War was considered to save the economy. John Maynard Keynes

▪ Born: June 5, 1883, Cambridge, . Died: April 21, 1946, Tilton ▪ British economist. Studied at Eton College and King's College, Cambridge – Philosophy and Mathematics ▪ As a young man he was homosexual but later found a love for woman as well and fell in love with and married Lydia Lopokova. ▪ Only education in Economics was a few lectures he attended as graduate student. Wagner-Steagall Housing Act

▪ The Act required that for each new public housing unit created, a unit of substandard quality must be removed. This one-to-one policy ensured that the federal program would increase the quality of housing, but not the quantity. ▪ Operational decisions were left to local authorities, ensuring that communities that did not want public housing could avoid it and those that did could determine the project’s location, virtually guaranteeing that housing projects would remain racially segregated. Wagner-Steagall Housing Act

▪ The Housing Act of 1937 set very low maximum income requirements for public housing residents. This policy was intended to alleviate fears that public housing would compete with the private , but it ultimately led to high concentrations of poverty within public housing projects. ▪ Housing was left up to local officials. Fair Labor Standards Act

▪ The Fair Labor Standards Act (FLSA) establishes minimum , pay, recordkeeping, and youth employment standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. ▪ The Fair Labor Standards Act of 1938 originated in President Franklin Roosevelt's New Deal. Fair Labor Standards Act

▪ The Labor Standards Act - banned child labor. - the first (25 cents per hour) was established. - The work week was limited to 44 hours per week (revised in 1940 to 40 hours per week). - A 1963 amendment called the Equal Pay Act prohibited differences in pay based on sex. Resources

▪ http://www.maynardkeynes.org/ ▪ http://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm ▪ https://en.wikipedia.org/wiki/John_Maynard_Keynes ▪ http://www.theguardian.com/books/2015/mar/08/universal-man-seven- lives-john-maynard-keynes-review ▪ http://www.federalreservehistory.org/Events/DetailView/27 ▪ http://www.investopedia.com/terms/k/keynesianeconomics.asp? layout=orig ▪ https://www.google.com/webhp?sourceid=chrome- instant&ion=1&espv=2&ie=UTF-8#q=what%20is%20the%20recession %20of%201937 Resources

▪ http://www.voxeu.org/article/what-caused-recession-1937-38-new- lesson-today-s-policymakers ▪ http://www.bostonfairhousing.org/timeline/1937-Housing-Act.html ▪ http://www.encyclopedia.com/doc/1G2-3406400301.html