The Great Depression lasted in America for at least ten years, but it took twenty-seven years to get the economy back above depression levels. To this day, the reasons that lead to the Great Depression are still being debated; although there are a few reasons that historians and ecoomics have agreed on. Such as, the stock market crash that occurred on October 29th of 1929. This happened when a few investors began selling their stocks, because they thought the bull market was going to end soon. The bull market was when prices were rising due to automobiles; steel was selling at a record high but was going down very fast.
Quincy Terrell Mrs. Stevens English III 10 December 2010 American’s Greed Leads to Poverty Republican nominee Herbert Hoover shared some hopeful words with Americans in 1928. He said that the day was in sight “when poverty will be banished from this nation.” This turned out to be was wishful thinking. One percent of the richest families in America during this time received one fourth of all U.S. income (Brinkley2). Buying stocks on margin became very popular during the 1920s. People began to abuse this system to invest huge amounts of imaginary money that only existed on paper, which back fired when the prices of stocks began to fall and they did not have money to pay for the stocks purchased (Lonkevich4).
Perhaps the worst economic downturn in the history of the United States occurred from 1930-1939. The Great Depression led to domestic and international crises effecting the poor and wealthy alike. Many financial experts today continue to debate the cause of The Depression, although most agree that several events led to the economic decline. The famous stock market crash on October 29, 1929 is just one of many causes economists believe led to The Great Depression. Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.).
However, it was the effects of the Great Depression in Germany that brought the Nazi Party to its first real nationwide importance. The rise in unemployment in 1929–30 provided millions of jobless and unsatisfied voters whom the Nazi Party exploited to its advantage. From 1929 to 1932 the party vastly increased its membership and voting strength; its vote in elections to the Reichstag increased from 800,000 votes in 1928 to about 14,000,000 votes in July 193. By then, big businesses had begun to finance the Nazi party because of tax increases and communists. The effects of the great depression caused mostly by Wall Street crash and therefore the American investors urgently needed the return of money they had lent to businesses.
Investors assumed causal depressions in the stock market where normal and would be followed by market growth. The stock market did increase in early 1930, but the United States hard already entered the Great Depression. The Great Depression forced American consumers to reduce their spending and forfeit on loans. This resulted in the failure of several large banks in early 1930 that further plunged the United States into financial trouble. In 1931, as consumer purchasing continued to decrease, American manufacturing also decreased and forced the failure of an even larger number of American banks.
This life changing experience shows how extreme the depression was. One day you had money in the bank, you had a job and your house. Then the next, the banks fail due to the loss of money on the stock market, as companies couldn't get loans and people had no money, industries were failing and they had to dismiss mass workers at their factories and offices. Due to the bank losing your money then not having a job, you had no income. This meant the house you was buying or renting, would be repossed as you couldn't keep up the payments.
In a lecture by Professor Newman, it was made known of the concept “selling short”, meaning, big businessmen would try to make more money on a market they knew was going down, and with that came a lot of common people losing money. When prices started to collapse over 40 billion dollars’ worth of stock value suddenly disappeared, and so did people’s money. With this caused the famous stock market crash in 1929. Almost immediately big businessmen started shutting down factories and firing employees and the demand for products went down, and with that, unemployment reached 15 million. In the lecture, Professor Newman uses the example of steel to show how much stocks declined.
The Great Depression was triggered by a sudden, total collapse in the stock market. This day, October 29, 1929, came to be known as Black Tuesday. There were many probable causes of this devastating time, such as massive bank failures, and the stock market crash. Others, such as economists, such as Peter Termin and Barry Eichengreen, believe the blame lies on Britain’s decision to return to the Gold Standard. According to many sources, recession cycles are a normal phenomenon.
This encouraged many people to invest their saving in the stock and motivated banks to loan money to their clients, so they could buy stocks on margin. Rampant speculation became a common practice and caused the stock prices to reach incredibly, almost illogically high prices. This stock bubble burst on October 21st 1929, when prices begun to fall rapidly, the crash was self-perpetuating since, the investors tried to get rid of their shares, putting downward pressure on the price. The giant loss of confidence soon spread all over the economy, causing drop in spending and subsequently drop in the industrial production, job losses and defaults on interest payments. To illustrate the scope of the depression, I will point out some of the
We have downfall and then we pick things back up and everything gets better. But , just when things get better, it happens to get worse again. Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars.