Chapter 3, The Anatomy of Crisis Summary and Analysis

The Great Depression that occurred in 1929 deeply and adversely affected the world. In addition to unemployment and misery in various countries, it contributed to the rise of Adolph Hitler and the fall of Chiang Kai-shek in China. The Great Depression produced a change in economic thinking, referred to as the Keynesian Revolution, named after the theories of the economist, John Maynard Keynes. The real cause of the depression was incorrect policy decisions by the government.

The Federal Reserve System came into being as a result of continual and severe bank panics and failures in 1907. When the Knickerbocker Trust had financial difficulties, it started a run on the bank. A run is when depositors withdrawal their funds, so they won't lose their money. The panic often spreads to other banks, who in turn restrict...