How Did The Great Depression Affect The Economy
Alex Lopez Lena
Barry D Wolfe
History- 1302
Jul-16
The Great Depression
Although some citizens today believe that the stock market crash in 1929 caused The Great Depression, history shows that the economic conditions in the U.S prior to the market crash weren’t even close to ideal. Yes, the 1920’s featured intense consumerism that aided the U.S economy. The problem was that credit and installment buying fueled much of this consumerism; which turned out to be unsustainable. The agricultural sector kept suffering from prize reductions and many farmers had to close down their farms due to the large debt in which these farm owners fell trying to buy machinery to increase production. The economic conditions of the U.S were racing downhill all through …show more content…
out the 20’s. Even today, economists have a hard time pin pointing what caused the Great Depression, since various explanations for the answer float about as theories. Among the many theories, three main themes stand out as causes for The Great Depression: U.S Historical factors, U.S central bank policies, and U.S politics.
In 1929, the stock market crash served to mark the beginning of the Great Depression.
Before 1929 the stock market had been vital in that it funded the U.S industry. The stock market crash contributed to the recession and signaled the unfortunate future that was yet to come but by no means did the crash caused the Depression. One of the main reasons for the sinking of the U.S economy was the U.S weak banking system. Although the U.S Federal Reserve system was created in 1913, the reality back then was that most of the American Banks were small, individual institutions that deeply relied on their own resources. So when there was an economic panic, people rushed to their small banks to retrieve their money and if the bank didn’t have enough money on reserve it would have to go …show more content…
under.
In 1930, things complicated for America when a wave of banking failures forced credit to freeze; a true devastating blow to the U.S Economy. As depositors lined up to collect their money, Banks had to ask for loans and sell assets before finally shitting down. A frozen credit system meant that less money was on circulation. This ultimately led to deflation. When Prizes dropped companies were forced to fire a great amount of employees, and when unemployment increased, consumerism decreased as a direct result. And since banks weren’t lending any money a lot of companies didn’t have enough money to pay their workers and were forced to shut down which created even more unemployment. The Federal Reserve was also responsible since it did very little to prevent the Depression by refusing to save the banks and by not infusing enough money in to the economy to bring it back up to its feet.
Herbert Hoover offered an explanation for the global phenomenon that was the Great Depression.
Hoover claimed that the main reason for the global catastrophe could be dated back to World War I because of the intricate web of debts and reparations between nations. Under the Versailles Treaty Germany had to pay 33 billion dollars in reparations to France and Britain which Germany couldn’t pay without borrowing money from American banks. So when the American credit system dried off it directly affected France, Britain, and Germany as well. With all the industrial turmoil happening in the U.S fewer American products were being shipped to Europe until one-day world trade came to a halt. Ironically, when America and the rest of the world needed more trade than ever, American Politics responded by raising tariffs to their highest levels in History, in which Europe responded by doing exactly the same. Creating more
unemployment.
Ultimately, the question of “What caused the Great Depression?” can be divided into three main factors 1) The economic euphoria of the 1920s 2) The Weak Banking and the Federal Reserve’s failure to rescue the economy 3) The dramatic increase of global isolation that lead to the collapse of world trade. When times are of lesser ill, the poor and sick are often seen as abnormal social groups so social programs become poorly funded and derogatory. How sad it is that a nation must undergo a Great Depression at once in order to be reminded that we are all cut from the same cloth. It is just a matter of time.
Barry D Wolfe
History- 1302
Jul-16
The Great Depression
Although some citizens today believe that the stock market crash in 1929 caused The Great Depression, history shows that the economic conditions in the U.S prior to the market crash weren’t even close to ideal. Yes, the 1920’s featured intense consumerism that aided the U.S economy. The problem was that credit and installment buying fueled much of this consumerism; which turned out to be unsustainable. The agricultural sector kept suffering from prize reductions and many farmers had to close down their farms due to the large debt in which these farm owners fell trying to buy machinery to increase production. The economic conditions of the U.S were racing downhill all through …show more content…
out the 20’s. Even today, economists have a hard time pin pointing what caused the Great Depression, since various explanations for the answer float about as theories. Among the many theories, three main themes stand out as causes for The Great Depression: U.S Historical factors, U.S central bank policies, and U.S politics.
In 1929, the stock market crash served to mark the beginning of the Great Depression.
Before 1929 the stock market had been vital in that it funded the U.S industry. The stock market crash contributed to the recession and signaled the unfortunate future that was yet to come but by no means did the crash caused the Depression. One of the main reasons for the sinking of the U.S economy was the U.S weak banking system. Although the U.S Federal Reserve system was created in 1913, the reality back then was that most of the American Banks were small, individual institutions that deeply relied on their own resources. So when there was an economic panic, people rushed to their small banks to retrieve their money and if the bank didn’t have enough money on reserve it would have to go …show more content…
under.
In 1930, things complicated for America when a wave of banking failures forced credit to freeze; a true devastating blow to the U.S Economy. As depositors lined up to collect their money, Banks had to ask for loans and sell assets before finally shitting down. A frozen credit system meant that less money was on circulation. This ultimately led to deflation. When Prizes dropped companies were forced to fire a great amount of employees, and when unemployment increased, consumerism decreased as a direct result. And since banks weren’t lending any money a lot of companies didn’t have enough money to pay their workers and were forced to shut down which created even more unemployment. The Federal Reserve was also responsible since it did very little to prevent the Depression by refusing to save the banks and by not infusing enough money in to the economy to bring it back up to its feet.
Herbert Hoover offered an explanation for the global phenomenon that was the Great Depression.
Hoover claimed that the main reason for the global catastrophe could be dated back to World War I because of the intricate web of debts and reparations between nations. Under the Versailles Treaty Germany had to pay 33 billion dollars in reparations to France and Britain which Germany couldn’t pay without borrowing money from American banks. So when the American credit system dried off it directly affected France, Britain, and Germany as well. With all the industrial turmoil happening in the U.S fewer American products were being shipped to Europe until one-day world trade came to a halt. Ironically, when America and the rest of the world needed more trade than ever, American Politics responded by raising tariffs to their highest levels in History, in which Europe responded by doing exactly the same. Creating more
unemployment.
Ultimately, the question of “What caused the Great Depression?” can be divided into three main factors 1) The economic euphoria of the 1920s 2) The Weak Banking and the Federal Reserve’s failure to rescue the economy 3) The dramatic increase of global isolation that lead to the collapse of world trade. When times are of lesser ill, the poor and sick are often seen as abnormal social groups so social programs become poorly funded and derogatory. How sad it is that a nation must undergo a Great Depression at once in order to be reminded that we are all cut from the same cloth. It is just a matter of time.