Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920’s and 30’s, and the extensive stock market speculation that took place during the 1930’s. These were not only the factors of the great depression, structural weaknesses and the fact that most of the other countries were affected just kept the depression going were also played a part. The resulting period ranked as the longest and worst period of high unemployment and low business activity in modern times. The Great Depression was the worst economic slump ever in U.S. history and one that spread to virtually the entire industrialized world. Banks, stores, and factories were closed and left millions of Americans jobless, homeless, and penniless. Many people came to depend on the government or charity to provide them with food. It led to a sharp decrease in world trade as each country tried to protect their own industries and products by raising tariffs on imported goods. The economy continued to fall almost every month.
At first the stock market was an important but not the dominant influence. But however, by 1929 the market became the symbol of the nation’s prosperity and an icon of American business culture. Everything was going great; the stock prices reached what looked to be a permanently high plateau. In September of that year, the market began to slide, but people ignored the sign. But on October 29, 1929, “Black Tuesday”, the stock market took a huge fall. More than 16 million shares changed hands in frantic trading. Investors soon realized they were heavily in debt so they started to sell their stocks, which led to others doing the same. That was the start of all the panic, everyone started selling but most of them couldn’t find buyers. The impact of “Black Tuesday” led to bank failures because speculators who had borrowed from banks to buy their stocks could not repay the loans because they could not sell their stocks.
This was the main start of the depression, because it not only wiped out the savings of thousands of Americans, it hurt commercial banks that had invested in the corporate stocks. Many of the middle-class people lost their life savings and had no other way to cope with the crisis. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe.
In the American economy, agriculture was in the worst shape. The farmers had still not fully recovered from the recession of 1920-1921, which made it worse. All the farming equipment was really expensive now and mortgage incurred during the inflationary war years. Because the prices were falling, farmers weren’t getting enough money and had to risk foreclosure. The textile industry, the railroad industry, and mining and lumbering industries were affected too. The textile industry suffered from decreased demand and excess capacity.
The railroad industry had to worry about shrinking passenger revenues, stagnant freight levels, and inefficient management. Also, it was in competition with cheaper forms of transportation. The mining and lumbering industries were producing more than what was being bought. Herbert Hoover had plans to help those ailing industries, but the trade associations that he promoted were ineffectual.
The depression of the United States affected not only itself but had an impact on the rest of the world. And the rest of the world’s problems had and affect on us. The international economic system could function as long as American banks exported enough capital to allow European countries to repay their debts and continued to buy American manufactured goods and agricultural products. Because European economies were struggling with large debts and trade imbalances with the United States, by 1931 most European economies collapsed. American companies would cut back production and cut back purchases of raw materials and supplies abroad, this affected many foreign economies too.
Because of all these factors of the depression lasted for a while. The family’s suffered from no money, food, and some without any homes. The Great Depression affected a lot of things, industries, economies, people, and businesses. The Great Depression became self-perpetuating. The more the American economy waited and didn’t do anything, the longer people expected the depression to last, and the longer they expected it to last, the more afraid they were to spend or invest their money, which was exactly what was needed to stimulate economic recovery.
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