Causes of the Great Depression
What could have caused of the Great Depression? The great depression was a severe economic down turn that began in the late 1920’s and went on to the late 1930’s or early 1940’s. It was the longest, deepest, and vastest depression in the 20th century. One of the major causes of the great depression was the stock market crash on Oct 29, 1929. Another reason for the great depression could be the failure of banks throughout the 1930’s. The decrease in aggregate demand also had a major effect on the economy and this decrease was caused by low incomes of consumers and partially by consumers feeling insecure after the stock market crash and then producers were overproducing because the consumers could not afford the product. The stock market crashed on October 29, 1929. This was a result of many people engaging in speculations which are risky short term stocks and many people had made profits from them in the 1920’s so more people began to engage. These people were buying the stocks partially with their money and partially from loans by stockbrokers. If the loans were not paid back, the stockbrokers who gave the loan get the whole stock which was purchased using the loans. So many people could not pay back the loans and so the stockbrokers were stuck with many stocks. So many stockbrokers started to panic and all of them started selling their stocks at once and this caused stock prices to decrease by drastic amounts and this decline was so drastic, that the stock market crashed. By November, 1939 stock prices had declined by 75%. Banks had leant the money to the stockbrokers so they could engage in the margin buying but the prices of the stocks had fallen so low that the stockbrokers could not make enough money and so they could not pay back the banks. Many banks had to reach into people’s personal savings just to keep operating so a “banking panic” arises, a banking panic is when depositors lose confidence in their banks and so...
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