Known also as Black Tuesday, October 29th left stockholders shattered with recorded losses reaching $40 billion dollars (Kelly, n.d.). Many banks and financial institutions began collapsing which led to irretrievable, uninsured deposits and savings. Fearing further loss, people began spending less which led to a decrease in production and an increase in unemployment. As companies began to fail, the government devised the Smoot-Hawley Tariff in order to protect American businesses. The Tariff placed high taxes on imports leading to a decline in international trade.
However, back then numerous people didn’t comprehend just how much of an impact farmers had on their everyday lives. If you took farms away from the United States during this period of time, everything would have entirely crashed. Farmer’s had complications with making a living because the rates of being a farmer were so high, as it is stated in document B. The farmers were also being abused by the railroad companies and banks. Like it says in document F “Nothing has done more to injure the (western) region than these freight rates.” Out west the railroad companies took advantage of the people and often they would charge more than four times the Eastern rates.
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.
It did not only affect Americans, but also the whole world. The Great Depression was caused by the crash of the stock market or the lack of real investment opportunities in the 1920’s, product innovation that caused less labor, President Roosevelt believed that it was caused by the structural problems and doubted simulative spending will solve the problem, and some argued it was caused by the shift toward modern employment relation that was made by the Great War. A Depression in the economy can start by raising taxes and dismissing government’s employees and both of these actions can start a depression and both of these were done by the government in 1929. Once this is done, it will have a chain reaction where it will get to the point where the economy will fall and cause its people to live in poverty. The prices of the products will either increase or stay the same but the wages of the people will always decrease.
This means that the prices for stock were too high, far higher than they were really worth, then they fell drastically. People who had borrowed money to buy high-priced stocks (intending to sell the stocks at a profit and repay lenders), went bankrupt. That’s further expounding on what I said about buying on margin. Black Tuesday also marks the beginning of the great depression (Regan3). Living conditions during this time were unsanitary and horrible.
After World War 1 Germany was hit with a three year period of hyperinflation during the reign of the Weimar Republic which started in 1921 and ended in 1924. Hyperinflation meant that the money was virtually worthless therefore prices shot up. Workers needed wheelbarrows to carry their notes as there was so much of it. Wages began to be paid daily instead of weekly. In this essay I will discuss if hyperinflation was completely caused by the Treaty of Versailles (1918-19).
This also meant that the land was not used to it full potential, all these factors lead to the famines and causing peasants to up rise using violence against government officials. This was on the verge of the revolution. The deep resentment from the peasantry towards the Tsar increased after the war as lots of money had being invested in the war and Russia had lost. Moreover, Sergei Witte had tried to improve the economy of Russia but it was to make sure that the Russian social order stayed the same. Due to industrialisation, factories were built which lead to rapid growth of population in the towns and cities for example from 98 million in 1885 to 125 million in 1905.
It was, without a doubt, the longest and most severe economic downturn in American history. Widely held to begin with the stock market crash of 1929, the Depression lasted until the advent of American involvement in World War two unemployment skyrocketed during the Depression years, reaching levels as high as one third of the population. Output shrank tremendously, falling by ten per cent a year from 1929 to 1932. Nearly half of the commercial banks of the United States failed during the Depression. Crop prices fell by over fifty %.
Other major causes and symptoms of such a severe economic crisis were the quantities of gold stockpiled by particular countries, large number of banks failing during the 1930s, the reduction in money spent by people and huge international trade barriers placed by governments. During this period it is estimated that international trade reduced by as much as 33% because of various factors. Even though the mentioning of the Great Depression indicates and is connected mostly with the USA it was a global event and a global economic depression. Every nation was in some way affected by the Great Depression, some more, some less, but it is considered that China’s silver standard contributed to making this country almost completely avoid the Great Depression. Countries in Europe experienced the depression differently and tried to fight it off differently.
If anything affects these factors will result in affecting the demand. For example, if inflation is getting too high, interest rates will be increased to stabilize the economic growth in the economy. This is the result of having the economy already close to full capacity which means that a further increase in AD will mainly cause inflation. Demand side policies include monetary policy and Fiscal policy. Monetary policy are actions of central bank, currency board or other regulatory committee that determines the size and rate of growth of the money supply, which in turn affects interest rates.