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The Great Depression: An Illusionist Economy

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An illusionist economy, it is essential to the modern, prosperous economy. This illusion is given through the issuing of credit. Credit is issued through banks in the form of loans, be it for a house, car, or even your groceries. Larger loans usually require a large application, and long time commitment, while the smallest loans are given based off of your reputation. As Americans, we simply call them credit cards or credit lines. Banks make profit by the application of interest to the credit loaned, but where does all this money come from if all the money is being given out? Well, it is something you have probably heard of, and they are commonly referred to as bank accounts. A thousand Americans get together put all their money into a bank, …show more content…

As one who is well versed in the agricultural industry, you would know that farmers only get a harvest once a year, so many farmers would live off a line of credit until harvest. Well, as one might begin to foresee, if the harvest does not render a profit, credit doesn’t get paid, and foreclosures prove imminent. Due to lack of regulation, this lead to a baking collapse as banks closed, and people went into a panic pulling out deposits elsewhere. Franklin Delano Roosevelt and his trusty board of economic advisers researched this very incident, and saw that an entire economy could not be based off of the people’s ignorance and faith alone, it needed regulation, and lack there off is what made it so difficult for the economy to recover. He and his advisors rubbed together their intellectual minds and, along with many other policies in the New Deal, proposed the Federal Deposit Insurance Corporation, or the …show more content…

It proved itself in the Great Depression by adding to recovery. It was so effective it was kept as a permanent institution even as countless other policies fell away. This reform is still in use today and for good reason. As stated above, the FDIC helped the economy recover, and its reformative action helped make an illusionist economy like ours remain more stable by regulating bank actions, insuring deposits, and restricting the people from large withdrawals during times of banking

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