The Great Depression

It is a fact that The Great Depression was caused by a failure of the free market and was resolved by government intervention because so many people were buying stocks in the 1920’s, The New Deal was implemented, and the results of Roosevelt’s office time were positive.

                The FED increased the money supply in the 1920’s therefore allowing the interest rates to decrease. With the interest rates so low so many people were buying stocks and putting themselves into debt thinking that in the future the interest would go up and they would receive more money than they paid to make themselves go into debt. The low interest rates caused the stock market to get overheated. And finally with all the stocks being bought and people sinking into debt the stock market crashed causing the people who invested in stocks to loose all their money.

                When the crash happened in October 1929 the FED decreased the money supply with the expectance that the interest rate would increase which would help bring the economy back up. However this caused the stock market to get worse than the primary problem. Hoover had certain policies and believed that the free market needed to be left alone to bring back up the stock market. This was a wrong thought, and then Roosevelt came along with his New Deal Policy. Within his first one hundred days he passed 16 government intervention acts that brought the economy back up. Over a few years of Government Intervention and the New Deal the Economy began to grow again, and interest rates were coming back up.

The results of the New Deal left a Legacy for us that were positive: The Federal government is responsible for not only the political, but also the economic welfare of the country; the President is expected to accept responsibility for the economic conditions in the country, but the Federal Reserve really calls the shots on a day-to-day basis; The New Deal opened the path for greater levels of government intervention in markets and with few exceptions resulting in government involvement steadily increasing.

Charter City

            Say you are to create a city in an uninhabited part of the earth. What Economic Institutions would you put in it to insure that the city continues to have economic growth? There are five main institutions that would be very important: Property Rights, Rule of Law, Markets, and Free Trade

 In D&C 134:2 it reads: “We believe that no government can exist in peace except such laws are framed and held inviolate as will secure to each individual the free exercise of conscience the right and control of property and the protection of life.”

Property Rights is one of if not the most important Economic Institutions. In D&C 134:2 it mentions the right and control of property or property rights. In “Charter City” the right to own property gives privacy and allows for the buying and selling of property. This keeps Economic growth up. In ‘Greed’ it talks about multi-millionaires having large houses while others are homeless. The right for those millionaires to own that property they earned. It’s all about the economy and how hard you work at things to earn a substantial amount of property. On the reverse end those who are living in small homes may have worked their hardest but still failed in the ability to earn large amounts of property. Still in “Charter City” with property rights everyone will have the opportunity to own property.

The Rule of Law is another great and important Economic Institution. It creates the consistency and stability over time in the Economy. No new president can change the economy. The Rule of Law makes it so that no one man is above the government, therefore, creating no one man above the economy to change to law. With a good Economy set up it does not need to change making the Rule of Law a valid Institution.

Free Trade is allowing labor to move freely in our economy. The Commerce Clause that existed when this country was still young limited the allowance of trade and labor to move freely. There were Tariffs put on imports from states known as Interstate Commerce. Make sure that in “Charter City” there is free trade.

The Fourth and final Institution that I would put in my city is Free Market. It goes basically hand in hand with Free Trade. President Ezra Taft Benson said in The Case for the Free Market “The Free Market is based on the right to enjoy private enterprise and prophet.” He goes on the say “Men inherently possess God implanted attributes and potential: Reason, Free agency, judgment, compassion, initiative, and Personal Striving for Perfection” So Free market would cover a lot of the Economic needs that the city would need. Without a good Market, there would be corruption. A good example of a corrupt Market would be countries whose presidents deem a powerful wealthy company as government property no matter how hard those who own the property worked to get it to the point that it is in.

As a review the Institutions in Charter city would be Property Rights, Rule of Law, Free Trade and Markets. What would you put in Charter City?