What Caused The Great Depression

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In the 1920's, after World War 1, danger signals were apparent that a great Depression was coming. A devastating cause of the Great depression was the banking panic and monetary contraction. The United States experienced a banking panic through the fall of 1930 to the winter of 1933. This banking panic lead to countless people simultaneously demanding their money deposits to be paid to them in the form of cash. People lost all confidence in these banks and wanted back all of their money. Unfortunately what people did not understand is that a bank does not keep all of the money that depositors have placed in the bank at all times. The bank only keeps a certain percentage of reserves, called required reserves, on hand at all times. The rest…show more content…
Today, looking back at what happened and dissecting these four main causes, I think it is safe to say that they all came hand in hand. It was basically a cause and effect action. When one thing occurred it made all the other causes fall into play. The Great Depression did final break away and lead to the devaluation of many countries. By devaluating, countries were able to reduce the exchange value of their currency by decreasing either their gold currency or their value relative to another currency. Even though this did not increase output directly, it did allow for the expansion of these countries money suppliers without any concern for gold movements and exchange rates. Many countries saw greater recovery and took advantage in this freedom. The United States for example increased their money supply by near forty-two percent by 1937. This monetary expansion increased globally which stemmed greatly from the gold inflow. The expansion of the monetary base stimulated spending by lowering interest rates and making credit more widely available. Due to expectations of inflation, potential borrowers became confident that their profits would adequately cover payments of a loan if they chose to borrow. Along with this, the United States also saw a rise in consumer and business spending. Due to the staggering amount of unemployed workers, Franklin Roosevelt issued the Workers Progress Administration under the New Deal. This association hired the unemployed to work on government projects. Also under the New Deal was the Agricultural Adjustment Association that gave large payments to farmers. This inevitably increased the workforce, along with production. A major cause of the Depression was that the pay of workers did not increase at all. Because of this,
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