I was also taught this story that WWII got the US out of the Depression, but I suspect it may not actually be true. The bottom of the stock market was in 1932; from that point till 1938, when fears of war caused another crash, it was sharply up.
The Federal Reserve was able to start the boom bust cycle again until 1937 when the bust started another mini-depression. I'm sure speculation about war had some part to play in this but the markets are usually bad about predicting wars. The immediate impact of war in Europe wouldn't have been that bad for Americans at least because international trade had dropped off considerably following a wave of rising tariffs and uncertainty in the global banking system.
World War 2 more than anything else forced the government to cut spending and pay off debt and while there was a depression following the war it followed the pattern of the 1920-1921 depression. In that depression the government did nothing to intervene and the recession while severe was over and almost no one remembers it. The other major factor in the recovery was the fact that the US had almost no competition for its factories and agriculture having been basically untouched at home by the war.
In the end war cannot create wealth it can only direct the wealth that was created for peaceful means elsewhere for the purposes of destroying wealth somewhere else.
After the war the US was forced to cut spending and pay back debt. The spending they had to cut were the New Deal programs that were holding back the economy from recovering.
Right. Technically we came out of the great depression, had a recession in between, etc. That's where neo-keynesians criticize FDR. The dip in 1937 coincided with a FDR being pressured into balancing the budget. It's much more complicated than this, but I used the WWII reference because usu. the next best answer is WWII. Now I'm told, that WWII wasn't responsible either!? What gives?
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