Symptoms And Causes Of The Great Depression
The Great Depression was a worldwide economic depression that lasted 10 years. Its kickoff was “Black Thursday," October 24, 1929. The height of the Depression was 1933. By then, unemployment had risen from 3 percent to 25 percent of the nation’s workforce. Wages for those who still had jobs fell 42 percent. Gross domestic product was cut in half, from $103 billion to $55 billion. The Depression caused many farmers to lose their farms.
At the same time, years of overcultivation and a drought created the “Dust Bowl” in the Midwest. It ended agriculture in a previously fertile region. The Fed began raising the fed funds rate in the spring of 1928. It kept increasing it through a recession that began August 1929. That's what caused the stock
market crash in October 1929. When the stock market crashed, investors turned to the currency markets. At that time, the gold standard supported the value of the dollars held by the U.S. government. Speculators began trading in their dollars for gold September 1931. That created a run on the dollar. The Fed raised interest rates again to preserve the dollar's value. That further restricted the availability of money for businesses. More bankruptcies followed. The Fed did not increase the supply of money to combat deflation. Investors withdrew all their deposits from banks. The failure of the banks created more panic.
The Fed ignored the banks' plight. This situation destroyed any of consumers’ remaining confidence in financial institutions. Most people withdrew their cash and put it under their mattresses. That further decreased the money supply. In 1932, the country elected Franklin D. Roosevelt as president. He promised to create federal government programs to end the Great Depression.
Within 100 days, he signed the New Deal into law. It created 42 new agencies. They were designed to create jobs, allow unionization and provide unemployment insurance. Many of these programs still exist. They include Social Security, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. These programs help safeguard the economy and prevent another depression.
At the same time, years of overcultivation and a drought created the “Dust Bowl” in the Midwest. It ended agriculture in a previously fertile region. The Fed began raising the fed funds rate in the spring of 1928. It kept increasing it through a recession that began August 1929. That's what caused the stock
market crash in October 1929. When the stock market crashed, investors turned to the currency markets. At that time, the gold standard supported the value of the dollars held by the U.S. government. Speculators began trading in their dollars for gold September 1931. That created a run on the dollar. The Fed raised interest rates again to preserve the dollar's value. That further restricted the availability of money for businesses. More bankruptcies followed. The Fed did not increase the supply of money to combat deflation. Investors withdrew all their deposits from banks. The failure of the banks created more panic.
The Fed ignored the banks' plight. This situation destroyed any of consumers’ remaining confidence in financial institutions. Most people withdrew their cash and put it under their mattresses. That further decreased the money supply. In 1932, the country elected Franklin D. Roosevelt as president. He promised to create federal government programs to end the Great Depression.
Within 100 days, he signed the New Deal into law. It created 42 new agencies. They were designed to create jobs, allow unionization and provide unemployment insurance. Many of these programs still exist. They include Social Security, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. These programs help safeguard the economy and prevent another depression.