How did the US get out of the Great Depression during WWII? If there was no money, how could the government start paying soldiers and factory workers?
In: Economics
The issue wasn’t that there wasn’t any money. The issue was that fewer loans were being given out (believe it or not but when a bank loans out money they are lending money that they don’t actually have – this is known as Fractional Reserve Banking – it allows the same money to be used by multiple people) and there was less spending (so businesses fired people, went bankrupt, etc).
With the New Deal and WW2 the government started spending. This got more money moving through the system so that people could be employed and start spending money and then they could take out loans and get the economy going.
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