Causes Of The Great Depression

The Great Depression

The next blow to aggregate demand occurred in the fall of 1930, when the first of four waves of banking panics gripped the United States (Romer, 2015). Millions of Americans lost their jobs during Herbert Hoover's time as president. Many didn't work for only a year, some longer than that. The time people spent unemployed lasted as long as more than four years during this crisis. It wasn't until World War Two that America once again saw a rise in the employment rate. People in the 1920s had more money because a lot more of them had jobs than those who did prior to this time. Thanks to having more money to spend, people bought company shares trying to make a quick buck. They thought that by investing constantly they
All the stocks were going up at once. People would borrow money from the bank. This money was used to fund their investments. Eventually they made a lot of money from those investments and then they would pay the loans back and still have money to spare for their enjoyment. “What they didn't know”, as Romer (2015) stated, “is that Banks, which typically hold only a fraction of deposits as cash reserves, must liquidate loans in order to raise the required cash.” This means that the banks didn't keep the amount of cash on hand that was actually deposited in them. So when people tried to get their money back, it wasn't there. This caused the failure of over 9,000 banks. Back then no one insured their Bank deposits. No one would have thought to do so, and as a result the banks failed, and people simply lost their savings. The banks that were still around were afraid of losing what little they had, and decided not to allow people to take out loans. This helped them to ensure their own survival. Next businesses began failing. As a result, the government created a tariff called the “Smoot-Hawley Tariff” which was designed to help protect American companies. Unfortunately, the result was higher taxes on imported good leading to less trade to America from other countries as well as a retaliation within the economic system. Two months later, after the
Laws like the laws 14th amendment were constructed. The 14th Amendment states that “all persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.(US constitution, 1787)” After the Civil Rights movement this law applied to citizens of black, white, Hispanic, etc origins. The only people these rights did not apply to were the non tax paying