Reason for Agricultural Price Drop in Great Depression

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  • #16145
    tocano
    Participant

    The AAA was just the latest in a series of govt interventions attempting to prop up the agriculture industry. Going back through the Agricultural Marketing Act/Federal Farm Board and various smaller bills (including failed ones like McNary–Haugen Farm Relief Act) and grant/loan programs back into the 20s and teens, it’s clear that govt was attempting to subsidize farming. All of this, as it is claimed, was because there was a decrease in prices that threatened farmers.

    My question is, WHY were agricultural prices dropping in the late 20s and early 30s so much? I’ve never gotten a very clear picture of this.

    Was it just a big bubble as follows:

    1) Govt loan and grant programs and various bills like the AMA going back through the 20s into the teens (and likely earlier), etc were encouraging more agricultural production than the market would bare. Thus incentivizing overproduction and surpluses which continually lowered prices as supply outstripped demand.

    2) European and other govts doing the same basic thing in their countries plus further interference to international trade due to tariffs and tariff retaliation. These in conjunction worked to lower international demand for American agricultural exports, depressing demand as American supply continued to be stoked.

    Am I way off the mark? Is there something significant I’m overlooking?

    #16146
    woods
    Participant

    Professor Herbener supplies me with this link: http://eh.net/encyclopedia/the-u-s-economy-in-the-1920s/

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