Notes
1 There were two different ways that the unemployment rate was calculated in this era. One dealt with "insured" workers covered by Britain's unemployment insurance program.
The other used "total unemployed." The rate of unemployment among insured workers was always higher than the rate of total unemployment, as the hardest-hit industries were those most involved in the highly unionized export sectors. For example, the insured unemployment rate was 10.4 percent in 1929 and 21.3 percent in 1931.2 In the 1920s, Keynes had argued that while Britain's economy was rigid and inflexible, America's economy did not suffer from this problem.
3 Of course, the two systems were intertwined since banks had lent enormous sums of money for financial market speculation in the late 1920s on margin. Any serious price decline would trigger margin calls that would lead to more selling - and so on.
4 This situation, in which no one knows which banks are safe and which are not, and therefore investors, including other banks, pull all liquid funds out of the banking system, is reminiscent of the financial collapse in 2008-2009. Since no bank knew the value of the complex mortgage-based derivatives held by other banks during the crisis, the interbank loan market collapsed.
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