The Great Depression
"In other periods of depression, it has always been possible to see some things which were solid and upon which you could base hope, but as I look about, I now see nothing to give ground to hope—nothing of man."
- Former President Calvin Coolidge, 1932
The 1920s was a time of roaring prosperity marked by booming business and negligible unemployment. Even during the October of 1929, the thought of poverty was close to an end. In fact, in 1928, President Herbert Hoover stated, “We have not yet reached the goal, but given a chance to go forward with the policies of the last eight years, and we shall soon with the help of God be within sight of the day when poverty will be banished from the nation”. The prescience of the end of poverty became known as the ‘American Dream’. However, this foresight was shortly lived. On Tuesday, March 26, 1929, the Hoover Administration saw the largest stock market crash of their administration to that date. Several months later brought Black Monday, the largest stock market crash in American history and the cardinal cause of what is now known as the ‘Great Depression’. The Great Depression was an economic deficit with worldwide effects that began with the stock market crash of October 1929. The most profound effect of it was the highest rate of unemployment in American history as banks, factories, and stores closed, leaving millions of Americans jobless with no money. Without money, many Americans had to rely on either the government or donations from charities to obtain food. As the depression continued, however, the Roosevelt administration created government agencies to aid in supplying Americans with food, relieving the effects of the Great Depression but leaving an irrevocable mark on the United States economic outlook and indeed, that of the entire world.
The causes of the Great Depression are still a matter of active debate among economists, and are part of the larger debate about economic crises. However, it is important to note that it was caused by the interplay of a number of factors as opposed to one single event. Many believe erroneously that the stock market crash that occurred on Black Tuesday (October 29, 1929) is what caused the Great Depression. Agreed it is what triggered the Depression but was definitely not the only factor that caused it. Two months after the original crash in October, stockholders had lost more than $40 billion dollars and even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough. This is when America truly entered the Great Depression. Secondly, throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Even the surviving banks, unsure of the economic situation and concerned for their own survival, stopped creating new loans. This exacerbated the situation leading to less and less expenditures. To make matters worse, with the stock market crash and the fears of further economic woes, individuals from all classes reduced purchase expenditure. This in turn led to a reduction in the quantity of goods and services produced and consequently a reduction in the workforce. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate. The unemployment rate rose above 25% which meant, of course, even less spending to help alleviate the economic situation. As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation. Another cause of the Great Depression is what was nicknamed “the Dust Bowl”. For years, American farmers overplanted and poorly managed their crop rotations, and...
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