What Caused The Great Depression Essay

The strength of the United States economy is shown in the 1920s, nicknamed, the Roaring Twenties. Said strength is presented through Treasury Direct’s article stating “The Government's debt shrunk from $24 billion to around $17 billion” and History’s article, “The Roaring Twenties,” that states “The nation’s total wealth more than doubled between 1920 and 1929.” This double in wealth was accomplished due to many factors. John Green explains in “The Roaring 20's: Crash Course US History #32” that “Productivity rose dramatically largely because older industry's adopted Henry Ford's assembly line techniques and newer industries like aviation, chemicals, and electronics grew up to provide Americans with new products and new jobs.” With a drastic
Martin Kelly explains in this article, “Top 5 Causes of The Great Depression” that “the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves.” During this time, the government did little to help small business owners or farmers. To add more factors leading into the problems that caused the depression, Calvin Coolidge, the president at the time, was not helping the economy either. Debby Meyer states in “Lesson 10 The Depressing 30’s,” that “[Coolidge] reduced government spending, cut taxes, and left the budget deficit a fraction of when he started.” While the president reduced government funds, “one percent of the nation's banks controlled fifty percent of the nation's financial resources and the wealthiest five percent of Americans share of national income exceeded that of the bottom sixty percent.” Furthermore, the end of the decade would mark the infamous event known Black Tuesday. This event was foreshadowed when stock prices declined multiple times prior. Beginning in September, then again in early October, then finally on October 18, the prices of stocks fell immensely and alarmed investors. The article “This Day in History: Oct 29: 1929 Stock market crashes” by History explains
Second, the economy had a poor corporate structure; “New holding companies were financed by credit.” Credit was a poor structure to base a company on because “Buying on credit is when one gives a down payment on a product to recieve it, then pays small amounts over a long period of time to pay it off instead of paying the full price up front,” according to the article “Easy Credit” on US History The Great Depression. When people took advantage of credit to buy luxurious items and could not pay it off they went into debt. Third, the economy had a bad banking structure. This weakness is known as the Monetarist Explanation by Jean Caldwell and Timothy G. O’Driscoll in their article “What caused the great depression?” The Monetarist Explanation states that “The Great Depression may have originated in a fall in total demand, but its length and severity resulted primarily from the unwillingness of the Federal Reserve System to prevent bank failures and to maintain a large enough money supply.” Caldwell and O’Driscoll go on to further explain that “The Federal Reserve System raised interest rates in early 1928, which discouraged business borrowing and spending and brought about the decline in production that began that summer. Interest rates were raised again in 1930 and 1931.” Fourth, the economy had a bad balance in internal trade. This being represented by that