Great Depression

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Most everyone has at least heard of the Great Depression that hit America by storm in the early twentieth century. Even though people are taught about the Great Depression, I personally think that a lot of people do not understand the severity that it caused and the livelihoods that it forever changed. The Great Depression, which lasted over a period of ten years, resulted in a lot of heartache for many nations worldwide (Fraser, 2010). As for the United States, the worst of the Great Depression harbored between 1929 through 1933 (Fraser, 2010). The Great Depression went down into history as being the worst traumatic economic moment for the United States (Paul Evans). It is still recognized for being the longest and severe depression that has ever been experienced by the Western hemisphere (Romer). The Great Depression originated in the United States causing drastic declines in output, severe unemployment, and heightened deflation in almost every country of the world (Romer). To this day economist and historians are still trying to analyze what really happened in the quake of the Great Depression, along with understanding the true underlying causes that created this grave crisis (Fraser, 2010). Even though the Great Depression will be forever stamped in history books as the economic meltdown of the twentieth century, we as Americans can learn to oversee and conquer what lies before us by understanding what put us in that dark place to begin with. The following depicts and analyzes the four main causes that economist believe lead to the demise of the Great Depression which are, the Stock market crash, banking panics and monetary contradiction, the gold standard, and international lending and trade (Bernstein). People thank declines in consumer demand, financial panics, along with misguided government policies to the dismay of the drastic decline of output. The decline of economic output was mainly due to a decline in aggregate demand (Bernstein). One of the main causes that contributed to the Great Depression’s radical decline of economic output was the New York stock market crash of 1929 (Romer). Leading up to the great crash of 1929, was the steady increase of stock prices between 1921 through 1929. In order to slow the growing prices of the stock market, the Federal Reserve stepped in and increased interest rates. With the increase of interest rates people stopped purchasing as much, especially in areas such as manufacturing, which in turn reduced production (James, Spring 2010). By the fall of 1929, stock prices reached an overwhelming low, and people started panicking. This lead to what we now refer to as “Black Thursday”, which occurred on October 24, 1929. On the following Tuesday, stock process hit an all time low which will forever be remembered as “Black Tuesday” (Romer). Since many of the stocks had been purchased on margin by using loans secured by only a small fraction of the stock’s actual value, the overwhelming price decline forced many to liquidate their holdings (James, Spring 2010). During this time, the stock prices for the United States declined a devastating thirty-three percent (Paul Evans). This terrified people, which unsurprisingly lead them to not purchasing items like they had originally. When people stopped spending like they normally did, this caused a chain reaction that lead to the decline of production for manufacturers and merchandisers (Romer). Another devastating cause of the Great depression was the banking panic and monetary contraction (James, Spring 2010). The United States experienced a banking panic through the fall of 1930 to the winter of 1933 (James, Spring 2010). This banking panic lead to countless people simultaneously demanding their money deposits to be paid to them in the form of cash (Richardson, September 2007). People lost all confidence in these banks and wanted back all of their money (Richardson, September 2007). Unfortunately what people did not understand is that a...
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