2 January 2013
Causes of the Great Depression
Since the beginning of the Industrial Revolution early in the nineteenth century the United States has experienced numerous recessions or panics. None of them were as severe or lasted as long as the Great Depression. There has been much debate over what were the causes of the Great Depression. Occurring in the 1930’s, the depression remains the most important economic event in United States history. There were many factors that caused the Great Depression; one of the causes was structural weaknesses and specific events that turned it into a major depression.
One of the main causes of the Great Depression was the stock market crashing on October 29, 1929. “During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929, after a period of wild speculation. By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value” (The History Channel). The unemployment rates skyrocketed from 3 percent to 25 percent. “Among the other causes of the eventual market collapse were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated” (The History Channel). Over $40 billion dollars was lost by stockholders. Although the stock market began to regain some of its losses by the end of 1930, it just wasn’t enough and America truly entered what is called the Great Depression.
Bank failures were another contributor to the Depression. The run on America’s banks began immediately following the stock market crash of 1929. Overnight, hundreds of thousands of customers began to withdraw their deposits. With no money to lend and loans going sour as businesses and farmers went belly up, the American banking crisis deepened. People who borrowed money from the banks to buy their stocks could not repay the loans because they could...
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