Title: PROTOTYPE COLUMN

Introduction

Welcome to 1929. You are in the United States, stepping into the role of a crisis manager. Your mission: guide the government through turbulent times and help steer the nation back to prosperity. Are you ready to confront the challenges and uncover the path out of the Great Depression? Immerse yourself in the thrilling world of economics and politics, and become part of the solution!

Breaking news:

"Stock prices plummet dramatically! A unprecedented crash unfolds at Wall Street, leaving companies in disarray and banks teetering on the brink of collapse. The full extent of the shockwave is yet to be realized. Across the United States, American citizens face uncertainty and fear grips the nation. The mood is ominous."

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A letter from the government

Dear Crisis Managers,

The United States Government reaches out to you in this grave hour with an urgent message. Our nation is engulfed in an ever-deepening recession. The catastrophic stock market crash has brought our economy to its knees and shattered the trust of the American people in our financial system.

Bank accounts are depleted, businesses are closing their doors forever, and millions of Americans are losing their jobs and means of livelihood. The streets are filled with the despair of those who have lost everything. An atmosphere of uncertainty and fear threatens to tear apart the social fabric of our country.

In this dark hour, we place all our hope in you, our capable and wise crisis managers. You embody the last chance we have to lead this nation out of the abyss. But before you can undertake this honorable task, you must prove to us that you are up to the challenge.

We therefore urge you to thoroughly investigate the causes of this crisis and to find a sought-after numerical code. This task will test your analytical skills, your acumen, and your resolve. Only if you master this challenge will you be granted the opportunity to save our country and receive a rich reward.

Your decisions must be prudent and insightful. The future of our nation depends on your ability to take the right actions amidst uncertainty and chaos. Show us that you are the leaders we need in this emergency.

With grave regards,

The Government

💡 Info

The government representative is so upset that he hurriedly lets you into the office and immediately disappears again. As you look around, you discover a few clues that could shed light on the causes of the crisis. These include a newspaper article, a note, a letter and a message on the answering machine. Examine the clues carefully to understand the background to the crisis and to be able to determine the numerical code at the end.

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1920s Economic Boom: A Flourishing Era

The 1920s witness a remarkable surge in economic prosperity across the United States, where innovation and optimism fuel growth. The streets are lively with bustling activity, cities expand rapidly, and the pace of life accelerates dramatically. The era is defined by technological advancements, with industries like automotive and electronics leading the charge. Henry Ford's assembly line makes cars accessible to the masses, while companies like General Electric thrive. The economic landscape is vibrant, offering abundant opportunities for employment and rising wages, enhancing the purchasing power of citizens.

Businessman at Work - Freepik

Stock markets experience a steady climb, driven by investor confidence and speculation. Banks extend generous credit, encouraging investments. This period of economic expansion creates an atmosphere of optimism and progress. Entrepreneurs launch new ventures, capitalizing on the buoyant mood. The middle class grows, and small businesses flourish, bolstered by the era's economic dynamism.

Beyond economics, society undergoes transformation. Jazz music takes over dance floors, fashion becomes more daring, and women gain more rights and freedoms. The public revels in newfound prosperity, with leisure and cultural activities reflecting the exuberance of the times. People embrace the joys of life, looking ahead to a promising future.

As a historian economist, one observes this era with enthusiasm, noting how the positive impacts ripple through communities and businesses alike. Better job prospects and rising incomes signal a bright outlook, as innovation continues to drive growth. The economic boom of the 1920s stands as a testament to human ingenuity and ambition, creating a legacy of prosperity that seems destined to endure.

Q: 📝 What information does the newspaper article contain about the economy in the boom period before the crisis? Summarize in your own words.
A: The newspaper article describes the 1920s as a period of significant economic growth and prosperity in the United States, driven by technological advancements and optimism. Industries like automotive and electronics thrived, with Henry Ford's assembly line making cars more accessible and companies like General Electric succeeding. The stock market rose steadily, supported by investor confidence and speculation, while banks offered generous credit to stimulate investments. This economic expansion fostered a positive atmosphere, encouraging entrepreneurship and the growth of the middle class and small businesses. Society also transformed, with jazz music, daring fashion, and improved rights for women reflecting the era's exuberance. Overall, the 1920s economic boom was marked by innovation, rising employment and wages, and a legacy of progress and prosperity.

📌 Meeting Note

To-do: Discuss with Mr. Smith the concerns about forming a speculative bubble in the stock market. (Investors are buying stocks on margin, expecting prices to rise. Stock prices inflated beyond company value. Low interest rates & easy credit are questionable. Should we consider government intervention?)

Q: 📝 Explain the meaning of this message. Research terms whose meaning you do not know.
A: The message highlights concerns about the formation of a speculative bubble in the stock market. It suggests that investors are buying stocks on margin, which means they are borrowing money to purchase stocks, anticipating that prices will rise. This activity can lead to stock prices becoming inflated beyond the actual value of the companies, creating a bubble that could burst if prices suddenly fall. The message also points out that low interest rates and easy credit are contributing factors, as they make borrowing cheaper and more accessible, encouraging speculative investments. There is a suggestion to consider government intervention to address these issues. Key terms include 'speculative bubble,' which refers to a situation where stock prices are driven up by investor speculation rather than the actual value of the companies; 'buying on margin,' which involves purchasing stocks with borrowed funds; and 'low interest rates and easy credit,' which are aspects of expansive monetary policy that can lead to excessive borrowing and investment.

Concerns About Banking Practices

Esteemed Government,

As an economic analyst during these tumultuous times, I am compelled to express my grave concerns regarding the banking system's reckless lending practices as elucidated in recent observations. The eagerness of banks to exploit the ongoing economic boom has led to a perilous environment where loans are extended without due diligence concerning borrowers' repayment capabilities. This imprudence has significantly contributed to the inflation of the speculative bubble, particularly within the stock market.

The ramifications of these practices are deeply troubling. As stock prices inevitably plummet, the ensuing wave of loan defaults has precipitated widespread bank failures. Such failures are not just isolated financial mishaps; they are systemic risks that threaten the very foundation of our economy. The resultant contraction of credit availability poses dire consequences, stifling business operations and leaving consumers in financial distress.

It is imperative that immediate measures be taken to restore prudent risk management within our financial institutions. The establishment of stringent lending standards and rigorous borrower assessments must be prioritized to prevent further destabilization. Moreover, the government should consider implementing oversight mechanisms to ensure compliance and safeguard against future crises.

The urgency of addressing these structural weaknesses cannot be overstated. Our economy's resilience and recovery depend on decisive action and robust safeguards to prevent recurrence.

With utmost regard,

James Harrington

Q: 📝 Explain the significance of this news. Why might this have contributed to the economic crisis?
A: The significance of this news lies in highlighting how reckless banking practices, specifically imprudent lending without assessing borrowers' repayment capabilities, can lead to systemic economic risks. These practices inflate speculative bubbles, such as in the stock market, and result in subsequent crashes when asset prices fall. The wave of loan defaults following stock market declines contributes directly to widespread bank failures, which in turn create a contraction in credit availability. This contraction stifles business operations and leaves consumers financially distressed, exacerbating the economic crisis. Therefore, the news underscores the urgent need for reforms in banking regulations to ensure prudent risk management and prevent future destabilization of the economy.

🔊 A message on an answering machine.

Q: 📝 Explain the significance of this news. Why might this have contributed to the economic crisis?
A: The significance of this news lies in its identification of a dangerous psychological trend among investors and the general public. The overconfidence and herd mentality, fueled by media narratives and financial advisors, can lead to excessive risk-taking without properly assessing potential negative outcomes. Such behavior often results in asset bubbles, where the prices of investments are driven up beyond their intrinsic values. When the inevitable correction occurs, the transition from euphoria to fear can be sudden and severe, leading to a market crash. This can have devastating impacts on the economy, including loss of wealth, reduced consumer spending, and financial instability. Addressing these concerns early is crucial in preventing such crises by promoting more prudent investment practices and encouraging awareness of potential risks.

Super! You've found out how the crisis came about and deciphered the code. You get the job and receive a deposit.

The country is now in a deep recession/depression and needs your help more than ever. You are given the contact details of various economic players affected by the crisis. Get in touch with them and use your economic expertise to improve their economic situation and lead the country out of the crisis.

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📝 To solve the people's problems, make notes for each sector. Record the notes in the table.

Sector | Problem | Impact on other sectors

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Solution

Sector | Problem | Impact on other sectors

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Now you know the problems and get to work. At a team meeting, you have collected ideas for solutions in a mind map. As the team leader, however, it is now up to you to work on the notes so that they can be shown to the government. Create a proposal for an economic stimulus package by working through the tasks.

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Q: 📝Explain the ideas for measures from the mind map.
A: The mind map outlines several strategies that were implemented during the Great Depression to stabilize the economy and support citizens. Government Intervention focused on Relief, Recovery, and Reform, which aimed to address immediate needs, stimulate economic growth, and prevent future depressions. Social Welfare Programs, such as the Social Security Act, provided financial support to the elderly and unemployed, ensuring a safety net for those most affected by the crisis. Employment Programs like the Civilian Conservation Corps (CCC) and Works Progress Administration (WPA) created jobs and infrastructure projects, directly reducing unemployment. Banking Reforms, exemplified by the Glass-Steagall Act, sought to restore trust in the financial system by separating commercial and investment banking activities. Financial Support initiatives aimed at stabilizing the economy by providing direct assistance to vulnerable populations. Lastly, World War II's economic impact inadvertently stimulated the economy by increasing production and reducing unemployment, showcasing how external factors can also contribute to recovery.

Q: 📝Write a letter to the government in which you propose sensible measures to overcome the crisis. Explain why these measures would help people in the various sectors.
A: Dear Government Officials,

As we face the ongoing challenges of the economic crisis, it is imperative to implement measures that will effectively alleviate the hardships experienced by various sectors. I propose the following strategies:

1. **Expand Employment Programs:** By increasing funding and support for initiatives like the Civilian Conservation Corps (CCC) and Works Progress Administration (WPA), we can create more jobs and stimulate economic growth. These programs not only reduce unemployment but also invest in vital infrastructure, benefiting communities nationwide.

2. **Enhance Social Welfare Programs:** Expanding the Social Security Act to provide more comprehensive support for the elderly and unemployed will ensure that vulnerable populations receive the assistance they need. This measure will help stabilize household incomes and increase consumer confidence.

3. **Implement Banking Reforms:** Strengthening regulations similar to the Glass-Steagall Act will help restore trust in the financial system by preventing risky banking practices. This reform will safeguard deposits and encourage prudent lending, supporting both consumers and businesses.

4. **Invest in Economic Stimulus:** Leveraging lessons from the World War II economic impact, we should pursue policies that boost production and innovation. Government contracts and incentives for industries can create demand and revitalize the economy.

These measures collectively address the needs of entrepreneurs, consumers, financial institutions, and trade experts by providing jobs, stabilizing finances, and encouraging growth. Implementing them will create a more resilient economy and support diverse sectors during these challenging times.

Sincerely,
[Your Name]

Great! You've done it and selected the right measures. The government implements your proposals. As a result, you bring the country into the upswing phase and things finally start to pick up again. You receive the promised fee.

Reviving the American Dream: Lessons from the New Deal

In the aftermath of the Great Depression, the United States embarked on a path of recovery, marked by remarkable government intervention. As a present-day historian economist, I reflect on how Franklin D. Roosevelt's New Deal reshaped the socio-political and economic landscape, laying a foundation for future prosperity.

Image Source: Freepik

The New Deal, a series of programs and reforms, aimed to provide relief, recovery, and reform to an ailing nation. Initiatives like the Civilian Conservation Corps (CCC) and the Works Progress Administration (WPA) not only created jobs but infused hope into millions of American lives. The Social Security Act emerged as a safety net, providing financial support to the vulnerable, ensuring dignity in the face of adversity.

Politically, the New Deal signaled a shift towards liberal policies, challenging the laissez-faire approach. It fostered a new era of government accountability, emphasizing the role of the state in safeguarding economic stability. Economically, the reforms curbed the reckless financial practices that had led to the Depression, with regulations like the Glass-Steagall Act restoring trust in the banking system.

Today, as we analyze the recovery phase post-Great Depression, we witness the enduring legacy of the New Deal. It underscored the necessity of government intervention during crises, shaping modern economic policies that continue to protect citizens. The resilience shown during this period offers timeless lessons for navigating future economic challenges.

💡 Info

Great, you got the country out of the crisis and the government was able to adopt rescue measures thanks to you.

The government is so enthusiastic about your work that it asks you to record your findings on the various phases of the economic cycle in order to better prepare the country for future crises. Complete the last assignment and you will receive a bonus.

Q: 📝 Explain the phases of the economic cycle so that other crisis managers can also benefit from your knowledge.
A: The economic cycle consists of four main phases: Boom, Recession, Depression, and Recovery. During the Boom phase, the economy experiences rapid growth, increased consumer spending, and low unemployment rates. Businesses expand, and investments flourish. However, this phase can lead to inflation and overconfidence in the market. The Recession phase follows, characterized by a decline in economic activity, reduced consumer spending, and rising unemployment. It is often triggered by external shocks or imbalances within the economy. If the recession deepens, it can escalate into a Depression, marked by prolonged economic stagnation, severe unemployment, and deflation. Recovery is the phase where economic conditions improve, consumer confidence returns, and employment levels begin to rise. Crisis managers benefit from understanding these phases as it allows them to anticipate challenges and implement strategies that stabilize the economy, mitigate risks, and promote sustainable growth.

You made it and completed all the tasks!

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