The Federal Reserve's monetary policies led to the GD because it kept interest rates so astoundingly low during the 20s. This created a credit-driven boom that popped when the fed began to tighten the money supply in the late 20s. It is similar to the Fed's astoundingly prolonged low interest rates during the earlier part of this decade. Does anyone else remember a credit-driven bubble that burst in the near past? Anyways, that is neither here nor there.
GDP did increase after 1933, but that is mostly attributable to the massive increase in government expenditures. The massive increase in government spending also had many negative effects. I know it appears as if the government had to provide jobs because the private sector was unable to, but that can also be attributed to the government's failed policies. Had the government not intervened to keep wages artificially high, the private sector would have been able to hire more workers. It is simple supply and demand. When the government creates a price floor for wages above the equilibrium (as it did during the 30s), it will create a surplus of labor. If the government provides jobs, unemployment will decrease as it did for the first few years after 1933. But when the government can no longer sustain defecits to provide jobs, which is what happened in 1937, the economy is in basically the same boat as it was beforehand.
That the government increased spending by such exponentially large amounts and consumed much of the capital was a negative. Net private investment during the Depression was atually negative in some years. Roosevelt's agricultural policies were also a failure. Why is it that when many Americans were losing jobs and income, did Roosevelt want to decrease farm production? Not only was the AAA unconstitutional, but it was unfair to most Americans. When food shortages are common and many families cannot afford the price of food, the last thing that should be done is to cut production.
I know FDR is a beloved figure by many Americans, but I think it is clear that his policies did not end the GD...they actually prolonged it.
