Was the Great Depression historical or aberration or was it a predictable outcome of the kind of economic system that existed in the United States until 1930s?

Answer 1

The Great Depression was an aberration once all factors dealing with the banking system at the time are put into focus. Bank dealings through the Central Bank, i.e. the Federal Reserve, were based on a gold standard; meaning there was only so much paper money for the gold the United States had on hand. When the Federal Reserve sent money to England to prevent their depression the cash did not flow back to America in a timely fashion and therefore a shortage of cash money became apparent. As long as there was no run on the banks everything was fine. As soon as people withdrew money from the banking system, which was tied to how much gold the Federal Reserve had, the system crumbled and the Great Depression begun in full swing. The adherence to the gold standard prohibited the Federal Reserve from expanding the money supply. This is the main reason the United States no longer relies on the gold standard for the basis of the dollar.