The Causes and Effects of the Great Depression On October 29, 1929, the stock market crash set in motion a series of events that led to one of the darkest periods in American economic history, the Great Depression. The Depression lasted for over a decade and the United States did not fully recover until 1941. While Franklin D. Roosevelt’s New Deal is mostly credited for getting the country of the depression, the main factor that helped was the countries entrance into World War 2 which provided many jobs such as munitions and ammunition that gave jobs and helped re-stimulate America’s economy. We know how the United States has fared since recovering from the depression, but what really caused it? The first cause actually started in the 1920’s.
[3] All in all, over $30 billion was lost on the stock market resulting in the entire economy collapsing. [4] However, instead of an isolated large scale problem that could be solved without too much damage, it soon spiralled out of control as banks virtually became bankrupt overnight leading to an increase in tariffs
For example, spending was lessened and investment was dropped. Businesses went through a downward spiral, and unemployment skyrocketed. When The Great Depression reached its climax more than 14 million Americans were unemployed, and many banks closed. The Great Depression brought about emotional anguish and physical suffering to many Americans. Yet, the United States Government was able to be an aid
The collapse of stock market happened because it had a weak foundation. In fact, it was dependent on borrowed money; banks would lend money to the population to buy shares in the market without making sure the borrowers were able to pay back. Moreover, facing the crisis over nine thousand banks were obliged to close, for they invested their client's savings in the stock market. Going through rough time financially, Americans are drastically forced to reduce their spending which lowered the amount of production; therefore, employers slashed the numbers of employees that caused the unemployment rate to rose from 4.2 in 1928 to 8.7 in 1930 and to 23.6 in 1932. In the middle of the crisis, several social classes experienced a harsh time.
In 1924 the crisis was brought to an end by the Dawes Plan, which restored the value of the currency. One result of this was go make the German economy dependent on loans from America. When the American Stock Exchange (Wall Street) crashed in 1929, this left the struggling German economy in chaos. Industries failed and unemployment rose to 6 million. Social unrest followed, as people starved.
This forced many small businesses to fail because they couldn’t compete. Taxes were raised from two billion dollars/year to thirty-five billion dollars/year. The government’s budget increased from nine billion dollars/year to one hundred billion dollars/year along with a four times increase in government personnel. Half of the goods produced in America during this time were for the war, which created 7 million new jobs. This upswing in the economy brought America out of the Great Depression.
There was a combination of domestic and worldwide conditions that led to the Great Depression. Many have believed that the crash of the stock market on October 29th, 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. Even though the stock market began to recover some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.
The share prices were lower, which caused the crash of the stock market. The collapse of the stock market was thought to be the main cause of the great depression, but many economists do not think so. Great Depression very quickly was spread all over the world. The Great Depression was a period of high rates unemployment, bankrupting banks, lowering prices, and increasing the uncertainty to American nation. Moreover, it brought big changes in U.S politic, society and culture.
The 1920’s in America was an incredibly prosperous time for the nation. America saw drastic economic, political, and cultural change in an age known as “The roaring twenties”. Rapid industrial growth and production, matched by increased consumer demand saw the nation's total wealth double in total from 1920-1929. By 1930, this prosperity had run out and severe economic problems struck the nation. The economy plummeted and everyone felt the effects of it .The severe downfall of the American economy in the 1930’s known as the Great Depression was the result of speculation and installment buying, income maldistribution, and overproduction throughout America.
When the stock market crashed, it immediately affected the economy in the matter of a few hours. At this time President Herbert Hoover was in office, and he was overwhelmed with the tragic situation. During his Presidency, he did his best to fix the economy. However, things did not begin to get better until Franklin D. Roosevelt took office in 1932. Roosevelt immediately began reconstruction on the American economy.