The Great Depression

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Causes and effects of the Great Depression in The United States

Name: Qicai Li
Course: ECO 258
Professor: Dr. Yasser Fahmy
Date: Dec. 8, 2011
Word count: 2050

Abstract
This paper discusses and analyzes the causes and effects of the Great Depression which happened in the United States during 1929 to late 1930s or early 1940s. The causes of the Great Depression are several, for example, the drastic decline in the quantity of money in industrial economies and the drops of the price on agricultural products. Since the Great Depression is the longest, most widespread and worst depression in the 20th century, the effects are tremendous. Like economic nationalism formed because of the Great Depression, and even the burst of WWII is related to it. Finally, the paper would come up with recommendations on how to avoid this kind of depression in the future.

Table of Contents
Page number
1. Introduction--------------------------------------------------------------------1

2. The causes of the Great Depression in U.S.
* Price drop in agricultural products----------------------------------2&3 * Decrease in supply of money--------------------------------------------4 * Gold standard----------------------------------------------------------5&6 * Bank failure----------------------------------------------------------------7

3. Effects on the U.S.--------------------------------------------------------8&9

4. Conclusion--------------------------------------------------------------------10

5. References--------------------------------------------------------------------11

6. Appendix----------------------------------------------------------------------12

Introduction:
The Great Depression is a global economic depression which began on 1929, and it lasted until late 1930s or early 1940s. The Great Depression originated in the U.S., on September 4, 1929, the stock prices started decline around this period. On October 24, 1929, known as the “Black Thursday” in the American Financial history, a huge number of American investors sold their stocks on the markets because of panic and rumor, this caused stock prices to drop tremendously, which led the paper value of dollar drained. Then on October 29, 1929, known as the “Black Tuesday”, another wave of selling stocks occurred, which leads to further drop in the price of stocks, hence it quickly spread world widely to almost every county in the world. Like a folk rhyme said “Mellon pulled the whistle, Hoover rang the bell, Wall Street gave the signal and the country went to hell”, Mellon’s full name is Andrew William Mellon, he is an American bankers, industrialist, philanthropist, and most important, the Secretary of the Treasury during the beginning of the Great Depression. Hoover is 31st President of the United Stated also during the Great Depression. And as said in the folk rhyme, the stock market crash is a symptom or signal, rather than a cause for the Great Depression. As Table 1 in the Appendix shows, the Industrial Average falls drastically during October, 1929. The Great Depression was the longest, most widespread, and deepest depression of the 20th century, and it is still used as an example of how bad the world’s economy can decline for nowadays. During just 2 weeks from October 29 to November 13, 1929, there was wealth worth than 30 billion dollars eliminated from the market, it equals to the overall spending in the WWI for the U.S. Moreover, in the early 1933, the unemployment rate reached its peak at 25% (Swanson, 1972), caused over 13.7 million workers lost their jobs. And nearly 10,000 Page 1

banks had failed; hundreds of thousands of Americans became homeless, and began congregating in shanty towns-dubbed “Hoovervilles”-that began to appear across the country (Bryant 1964). According to Table 2 in Appendix, we can see how bad the United States suffered from the Great Depression by comparing to other...
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