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Panic selling on Black Tuesday caused a rapid decline in the U.S. stock market. Selling caused the loss of billions of dollars in market value. The loss in market value shattered the public's confidence in the market, caused the failure of several banks, and worsened the instability of the economy. Although it was not the only cause of the Great Depression, it did expose the issues within unregulated markets and triggered several reforms created to stabilize American capitalism. (Richardson)
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When the banking system came close to completely failing, President Roosevelt declared national Bank Holidays to prevent people from withdrawing funds and losing even more money, and, consequently losing trust in the banking system entirely. The Emergency Banking Act came to stabilize the banking system and allowed some Americans to regain trust in the financial system. This rebuilt some people’s trust in the banking system during the time of the Great Depression. (Silber, 20)
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Created as a result of the Banking Act of the 1933, the FDIC ended the phenomenon of bank runs and guaranteed the protection of bank deposits. This protection of saving provided greater system stabilization. Moreover, the FDIC guaranteed a significant change in consumer savings protection. Banking, once distrusted by consumers, became a more protective and trusted system. (Karaken, 1)
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Pensions and unemployment insurance along with welfare programs were created from the Social Security Act fundamentally changing the Social Contract of the United States. It made the federal government responsible for economic security and became the backbone of the welfare state, transforming the expectations of the labor market and of retirement for the future. (Kennedy, 253)
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The FLSA set a federal minimum wage, eliminated child labor, and defined the 40 hour workweek. It revolutionized the dynamics of labor relations on and introduced new protections on the American labor force, standardizing the practice of wages across the country and pushing employers towards more regulated practices of labor. (Douglas Hackman, 491)
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Benefits under the GI Bill offered various services to veterans. These services included covering tuition fees, training for jobs, and offering housing loans. Because of this Bill, the middle class expanded, and homeownership became more prevalent across the country. Higher education became more accessible and the policy reformed the trends of suburbanization in the country, along with the sustained economic growth. (Martorell Bergman, 3)
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The Employment Act Enacted committed the federal government to achieving and sustaining full employment and stable economic growth. It created the Council of Economic Advisers and assumed that federal involvement was crucial to managing the economy following the Depression and the experience of WWII. (Weidenbaum, 881)
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In 1971, Nixon effectively got rid of the Bretton Woods system by severing the convertibility of the dollar to gold. The system of floatation exchange rates that followed added substantial innovations to global finance, but also increased volatility of currencies. The 1970's inflation and overall economic instability was thus partially a result of these developments. (Bordo, 231)
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The establishment of NAFTA forged a monumental free-trade zone with both Canada and Mexico and transformed the scale and geography of manufacturing and supply chains. While trade barriers became less restrictive and cross-border investments increased, NAFTA also caused job contractions within some industries and contributed to the controversies of globalization. (Villareal Fergusson, 1)
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The financial crisis began when the housing bubble collapsed and prominent institutions like the Lehman Brothers collapsed under the strain of high risk mortgage backed securities. The crisis saw credit markets freeze and resulted in millions losing their homes and jobs and the recession becoming global in scope. The crisis exposed the deep flaws of unregulated finance and resulted in substantial reforms meant to stabilize the banking industry. (Arner, 96-97)