Causes of the Great Depression

Topics: Wall Street Crash of 1929, Unemployment, Great Depression Pages: 3 (916 words) Published: December 13, 2012
Causes of the Great Depression

the 1920’s was period of grate happiness among the people of all kind, but it was not until the end of this decade that the financial had been noticed. Later a place called the stock market crash of 1929 came as a shock to most Americans and especially the bankers, that looking at the causes of the Great Depression; it was clear how America entered this period. Not only was there poor economic, but an uneven distribution of wealth and poor debt structure. The first major cause of the Great Depression “was a lack of diversification in the American economy in the 1920s. Prosperity had depended on a few basic industries; some was not able to construction and automobiles, which in the late 1920s began to decline America had become so reliant on these two major industries that it did not realize the effect they would have on the economy once they began to lack profit. “Newer industries were emerging to take up the slack / but none had yet developed enough strength to compensate for this decline. Being the beginning of the economic fall, American’s were not alarmed by this slight problem in the economy. “A second important factor was the misdistribution of purchasing power and, as a result, a weakness in consumer demands. As industrial and agricultural production increased, the proportion of the profits going to potential consumers was too small to create an adequate market for the goods the economy was producing this was a basic problem of supply and demand. Because the demand for certain products was so high, the industry would produce them in mass amounts ultimately leading the seller to gain no profit from the consumer. American banks also started to observe financial problems with the loans they would provide for certain customers. This lead to the third major cause which was the “credit structure of the economy. In the 1920’s people began to buy all products on credit because it was the fastest way to get what they wanted when...
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