‘New Dealers’, aimed at finding a domestic solution to the catastrophe, said that the Depression was a calamity of ‘under-utilization’, that low earnings and high costs had made it extremely complicated to acquire the commodities of the industrial financial system; and that a shortage of demand had caused the financial slump. One of the earliest significant post-war explanations came was given by economists ‘Milton Friedman’ and ‘Anna Schwartz’, in their ‘Monetary History of the United States (1963)’. They argued about what was identified as the ‘economic interpretation’. Hey claimed that Great Depression was caused by a ‘radical contraction of the currency’. This argument goes well with the ideas that Milton Friedman has supported for several years.Another very different argument, known as ‘spending interpretation’ was put forward by the economist Peter Temin. According to Temin, the cause of the depression was not financial contraction, but a slump in savings and buyers’ spending, which led to the drop in the money supply and caused financial crisis (Bernstein, 1989, p.As a result, of the severe drop within buyer as well as business demand, actual output in the United States, which had been going down steadily up to this level, dropped quickly during the last part of 1929 and throughout 1930. The ‘decline in stock value and demand’ causing the drop in manufacturing as well as employment within the United States (Rothbard, 2011, p.A number of economists think that the Federal Reserve permitted or sourced the massive drops within the American demand partially to ‘maintain the gold criterion’. According to the gold criterion, every nation set a rate of its currency with respect to gold and took financial steps to protect the unchanging price. It is feasible that had the Federal Reserve developed significantly with regard to the financial institutions’ panics, foreign persons could have lost assurance in the United States’ loyalty to the gold criterion.
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