Causes Of The Great Depression

1920s was the sweetest decade for most of the people in United State, and it had to be credited to the stock market boom and the people could buy the stocks on margin as they thought stock market at that period was infallible investments where they can see their money grow effortlessly and easily. For the Americans, they perceived 1920s as the “Roaring Twenties” as the people had earned a lot of money from the stock market due to the stock price soared in upward trend started in 1924, reached its peak in 1928. Thus the people enjoyed all the luxury goods such as electric appliances, cars, ready-to-wear clothes and even houses. None of them can ever foresee the austerity is coming at the next decade when they were in the time of prosperity in
It led to the people’s urge to sell all the stock immediately, afraid losing all they had. With stock market crash as a major factor, it triggered the Great Depression. However there is public perception that stock market clash of 1929 is equal to the Great Depression. In fact, Great Depression can be attributed to several causes other than stock market crash. According to Kelly (2012), the top five causes of the Great Depression are stock market crash of 1929, bank failures, reduction in purchasing across the board, American economic policy with Europe and drought condition. By here, the terms ‘stock market’, ‘bank’, ‘economic policy’, more or less link to investment when it comes to determining the prosperous ages or recession era, even without people notices. Therefore, it is apparent that investment is critical in determining the level of prosperity, especially after the lesson learnt from Great
A huge amount of money is needed to be invested into it in order to start up and establish a new-born industry. When a great investment is made to build up a tremendous industry, the level of prosperity would increase (Heilbroner & Milberg, 2011). It was due to when a new industry is ready to be building up, it created more job opportunities and it lowered the unemployment rate, more people were getting salaries and wages, led to improvement of their standard of living and have more money to spend. It can be proven when Industrial Revolution taken place during 1820 to 1870 (Kelly, 2012). However, when the industry is matured and well-established in 19th century, investment was considered as completed. At this critical moment, the level of prosperity would drop if there is no second wave of equivalent attractive investment to rise and take place immediately (Heilbroner & Milberg, 2011) . Therefore, the level of prosperity rises when investment is