AN OUTLINE AND CRITICAL ASSESSMENT FOR FINANCIAL ARTICLE 2 Essay

AN OUTLINE AND CRITICAL ASSESSMENT FOR FINANCIAL ARTICLE 2 - Essay Example Topic Statement and purpose: To develop the great depressions debt-deflation theory statistically and theoretically. B. Thesis Statement Reaction 1. Special conclusions new and important II. Description of the article A. Special conclusions 1. Cycle theory 2. Debt and deflation roles 3. The 1929-33 deflation 4. Debt starters B. Illustrations 1. Graphs III. Evaluation A. organization of the article B. style used in the article C. Effectiveness of the work D. Topic treatment E. assumptions of the author about the audience Critical Assessment The article entitled â€Å"The Debt-Deflation Theory of Great Depressions† authored by Irving Fisher seeks to present a theory of debt-deflation of the great depression in a statistical and theoretical manner. The paper draws conclusions deemed as being special, new, and important and aims at specifying what some of these conclusions are and also fitting them in the conclusions of the other students found in the field of economics. The purpo se of the author is to offer his work as embodying on the topic of cycle theory. Fisher (1933: p 337) captures a reaction to the thesis by mentioning the reaction comment of two of the best and most-read authorities in economics field. One of the best-read authorities described the special conclusions as being important and new. The author selects the point form structure in presenting the special conclusions. ... It is only in the mind or imagination where the variables can only remain stable and be kept in balance or equilibrium by forces of demand and supply. Economic theory comprises of a study of dis-equilibrium and imaginary equilibrium. Dis-equilibrium proceeds in either an actual historical case or any constituent tendency. The old persistent notion of business cycle being a simple and self generating cycle is a myth Innumerable tendencies for economic dis-equilibrium roughly classified under trend or growth tendencies, haphazard disturbances, and cyclical tendencies. Sorts of Cyclical tendencies include one being forced on economic mechanism and the other is the free cycle The price level disease and the debt disease are considered the most important causes in the booms and depressions than all the other causes. Over-speculation and over-investment are important but would have far less severe results if not conducted using borrowed money. 2. Debt and deflation roles Secondary variable s affected by deflation and debt are circulating media, debts, their circulation velocity, net worth, price levels, profits, trade, interest rates, and business confidence. Debt liquidation leads to distress selling and deposit currency contraction causing a fall in price levels. Apart from the interest on debts and debt, the other fluctuations come about as a result of decrease or fall in price Deflation occurring for another reason apart from debt results to a much less evil Deflation caused by debt reacts on the debt 3 The 1929-33 deflation An example of debt-deflation depression Unless a counteracting cause is brought in to prevent the decrease in the price level, depressions such as that