3 Causes of the Great Depression

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List and define 3 causes of the Great Depression. You must explain how this incident may have caused the GD and its effect on America and what was done to counter this. In the roaring 20’s many American’s lived beyond their means. About 60% of the population lived at or below poverty level but this great new idea of lending people credit so that they could get things now and pay for them later. Many American took advantage of this. The car industry became the number one industry in the country as people started borrowing money. The problem with banks lending this money was that there were no safeguards in place. The banks had not yet learned the importance of security and collateral. They had also not yet learned the importance of limiting the amount of money they leant and to whom. During the Great Depression more than 9000 banks closed and millions of people lost their life savings. When the banks closed people became scared and stopped spending as much. The drop in spending caused companies to lay off workers. This caused more banks to close, followed by more reduction in spending and then more employees were laid off. Luckily Franklin Roosevelt came along with the New Deal and created the FDIC which protected consumers money kept banks from closing. Another cause of the Great Depression was the stock market. Only about 1 percent of Americans actually bought into the stock market, the caveat to that was that that same 1 percent of Americans controlled more than 50 percent of American Industry. The stock market was allowing people to buy stocks on margin. Buying stocks on margin is the same as borrowing money to buy stocks; this caused the Dow Jones to rise from 191 in 1982 to an astounding 381 in September of 1929. When the market crashed many people simply could not afford to pay back the loans and subsequently lost everything. Because of investors losing
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