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  • What was the cause

  • of the Great Depression

  • that started in 1929?

  • That was a long time ago.

  • So what's this have to do with you?

  • Well, no matter what

  • you're going to do,

  • you're going to be working

  • with money.

  • And it's important

  • for you to understand

  • how money works

  • and how it could stop working.

  • The lesson you're about to learn

  • applies to all currencies at all times.

  • Despite persistent myths,

  • the Great Depression was not

  • caused by the stock market crash

  • or by a failure of markets.

  • It was caused by a failure

  • of the Federal Reserve System,

  • the so-called "lender of last resort."

  • Created by the U.S. government

  • in 1913,

  • the Federal Reserve System

  • is supposed to prevent

  • booms and busts

  • in the overall economy

  • by providing a sound currency.

  • In the 1930s they failed in this job.

  • They did not provide enough

  • liquidity to banks,

  • the raw material banks need

  • to carry on their business.

  • Managing liquidity correctly

  • keeps the buying power

  • of money stable

  • and keeps banks

  • from running out of cash.

  • Imagine if you couldn't

  • get your money

  • when you needed it

  • and the problems that would cause.

  • I went on this date last Saturday.

  • Are you serious?

  • The guy was really cute.

  • Hi, I’m Carra Cheslin and, like you,

  • my friends and I would like the world

  • to be better.

  • It really bothers us

  • that when we try to solve a problem,

  • sometimes the solution

  • causes even more problems.

  • Wait guys if were gonna

  • catch the movie

  • we should probably get going.

  • It starts in like fifteen minutes.

  • Oh yeah sure.

  • Can I just run in and

  • get some money? I'll be right back.

  • Yeah. Hurry up.

  • What? That doesn’t make any sense.

  • Grandma just gave me

  • a check last week.

  • Okay, don’t panic. Try again.

  • This is gonna take longer

  • than I thought,

  • the machine is like not making sense.

  • Here, lemme see.

  • Okay.

  • Has this ever happened to you?

  • Well, once it happened

  • to millions of people

  • and it wasn’t just some

  • little computer glitch.

  • It was called the Great Depression

  • and well you know about that.

  • Did you do your pin right?

  • Millions of people put their money-

  • their hard earned

  • savings into the bank.

  • So imagine the panic that they have

  • when they tried to withdraw

  • some of their life savings

  • and the bank refused them!

  • What?

  • And imagine that it happened

  • not only to you,

  • but to people all over?

  • Sound farfetched?

  • Well, it really happened in the 1930s.

  • Millions of people were left

  • with just the money

  • they had left in their wallets.

  • But why did all those bank

  • vaults go empty

  • and where did all the money go?

  • So...

  • what caused the Great Depression?

  • I have to think. Give me a sec.

  • I’m not really that sure.

  • It might have been World War I.

  • Just the lack of jobs.

  • It was the stock market crash.

  • Instability of some sort. Right?

  • Seeno one even mentions

  • the absence of cash,

  • which caused a national loss of faith

  • in our monetary system.

  • That’s what caused

  • the Great Depression.

  • And it didn’t just affect adults.

  • Did you know that at the height

  • of the Great Depression,

  • there were a quarter

  • of a million teenagers

  • living on the roads, by themselves,

  • in America,

  • and tens of thousands

  • of kids with their families?

  • I had no idea. Can you imagine?

  • Their fathers lost their jobs

  • they’d been evicted from their homes.

  • Even their schools

  • thousands of them--

  • went bankrupt and closed their doors.

  • How could this

  • have happened in our country?

  • Our economic system

  • hadn’t changed,

  • so what was it?

  • Wall Street,

  • the New York Stock Exchange.

  • Since it’s kind of

  • the center of capitalism,

  • I thought I ought to

  • come here myself

  • and see what it’s all about.

  • Wow! It’s pretty crazy down there….

  • all the hectic activity.

  • But now that I’m here,

  • I see that it’s just an open market

  • with buyers and sellers -

  • based on supply and demand -

  • to the tune of 2 billion shares a day.

  • Most of us know what happened

  • here in 1929.

  • The stock market crashed.

  • I’ve heard others blame it

  • on corruption or income inequality,

  • or even on the

  • capitalist system itself.

  • What happened was,

  • more people wanted to sell

  • than wanted to buy,

  • so prices droppedbig time.

  • But while there are many things

  • that contributed to

  • the Great Depression,

  • there’s another less dramatic,

  • but just as important reason

  • that has kind of fallen

  • through the cracks.

  • Economists know about it,

  • but most people don’t.

  • It has more to do with money

  • than it does with stocks.

  • Not far from the stock exchange,

  • is this building: 79 Delancey Street.

  • This building doesn’t look

  • like much now,

  • but then it’s been through

  • some rough times.

  • You see, this is the building

  • where the depression

  • actually started -

  • not Wall Street.

  • Most people think that the economy

  • was booming right up to the crash;

  • but it wasn’t.

  • Business had, in fact,

  • begun to turn down in mid-1929.

  • The crash made the recession worse.

  • And then came

  • a series of bank failures

  • in the South and Midwest.

  • But the recession

  • only became a really serious crisis,

  • when these failures

  • spread to New York,

  • and in particular to this building,

  • then the headquarters

  • of the Bank of United States.

  • The bank’s customers

  • had heard lots of rumors.

  • They panicked.

  • They tried to withdraw

  • all of their deposits in cash at once--

  • and that’s what a run on the bank is.

  • What would you do

  • if you went to the bank to withdraw

  • all your hard earned savings,

  • and the bank didn’t

  • have your money?

  • I don’t trust banks

  • because of that reason.

  • I’d be scared to death.

  • I’d be angry.

  • I’d be frustrated.

  • I’d be callinmy lawyer.

  • That happened to my parents

  • and they had to do manual labor

  • for years.

  • If banks are gonna

  • lose your money,

  • you might as well just

  • make your own.

  • Why not make your own?

  • The ten dollar Carra Reserve note

  • Nice, huh?

  • But why will everybody

  • take this dollar,

  • and not my money?

  • Theyre both only paper, after all.

  • And, what exactly

  • is money anyways?

  • And what I came up with is this.

  • it all comes down to trust.

  • You see, on my money it says,

  • In Carra We Trust.”

  • The people in my house

  • know that my word has value.

  • And it’s the same

  • with the world’s national currencies:

  • they only have value

  • because their governments

  • say they have value,

  • and in the case of the U.S. dollar,

  • at least,

  • most people on earth have faith

  • that our government and economy,

  • and therefore the dollar,

  • will continue to be strong.

  • But if something happens

  • to break that faith and trust,

  • the economy can crumble

  • and people become poor.

  • And that’s what happened

  • in the Great Depression.

  • So where did all that cash go?

  • Well, first off,

  • you might think that when you take

  • some cash into a bank

  • to deposit it,

  • that the bank takes your money

  • and sticks it into a vault somewhere

  • until you need it again.

  • But that’s not how it happens.

  • Hi. I’d like to make a withdrawal.

  • The bank uses our money-

  • theyre in business to do that.

  • They take a large part

  • of what we put in

  • and then lend it out to other people.

  • All right. I think we can do

  • a loan for about $600,000.

  • That’s great. Thank you.

  • The bank also invests in things

  • like money market accounts,

  • real estate, bonds, and mutual funds.

  • Our money is what

  • makes them money.

  • Thank you.

  • Of course they have to keep

  • some money on hand.

  • So that when I stop by

  • on my way to buy something