The Five Major Causes Of The Great Depression

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The Great Depression was one of the hardest times that the American economy has gone through. The Great Depression began with the Wall Street Crash of October, 1929 and quickly spread throughout the world. The stock market crash marked the beginning of a many years of high unemployment, low profits, horrific farm incomes, lost opportunities for economic growth, and insufficiency of money. Reasons of the Great Depression include numerous things, especially high consumer debt, badly controlled markets that permitted loans that were given out to frivolously by banks and investors, the lack of high-growth new industries, all working together to create a downward economic spiral of reduced spending and lowered production (Rosenberg, Jennifer).…show more content…
Stock Market Crash of 1929 caused bank failures all over the United States. Throughout the 1930’s over nine thousand banks failed. Beginning in October 1930 and lasting until December 1930, the first of a series of banking panics now accompanied the downward spasms of the business cycle (Rosenberg, Jennifer). Although bank failures had occurred throughout the 1920s, the magnitude of the failures that occurred in the early 1930s was of a different order all together.The absence of any type of deposit insurance resulted in the contagion of the panics being spread to sound financial institutions and not just those on the margin. Bank deposits were uninsured and because of that people lost their savings. Surviving banks weren’t as willing to create new loans because they were concerned for their survival (Causes Of The Great Depression). More problems arose that caused the Great Depression such as problems with the American economic policy with Europe and drought conditions. Although drought conditions are not a direct cause of the Great Depression, the drought occurred in the Mississippi Valley in 1930. Many could not pay their taxes or other debts because their farms could not grow any crops. Many had to sell their farms for no profit. The area that this happened was called “The Dust Bowl” (Causes Of The Great…show more content…
This was followed by the Securities Exchange Act of 1934 which created the Securities and Exchange Commission. Federal insurance of bank deposits was provided by the FDIC, and the Glass–Steagall Act. The institution of the National Recovery Administration (NRA) remains a controversial act to this day. The NRA made a number of sweeping changes to the American economy until it was deemed unconstitutional by the Supreme Court of the United States in 1935 (The Great Depression). The major effect of the Great Depression is the New Deal on America that expanded government intervention into new areas of social and economic areas and the creation of more social assistance agencies at the national level. The relationship between the national government and the people changed
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