What Caused The Great Depression
The Great Depression was a cataclysmic event that not only devastated the economy of the United States but also affected the rest of the developed world. There were three underlying causes of the depression. The inherent weakness of the American economy, the weakness of the European economy as it tried to rebuild from WWI and the stock market crash of 1929. Had these events happen individually, the great depression probably would not have been so severe.
The overall lessons that should be taken from the depression are the need to regulation of the markets and securities, accurate financial reporting of manufacturing and business's and solid financial planning by both the nation and by individuals to ensure the solvency of our economy.
After WWI, the American economy was booming. Manufacturing of durable goods was at an all time high and the future of our nation looked extremely bright. But, slowly consumer purchasing began to slow and caused the manufacturers to slow production and reduce labor force. The U.S. agricultural industry was already in a deep recession with prices for crops and food stuffs at an unprecedented low.
The stock market crash of 1929, also known as Black Tuesday, is perhaps the most dramatic cause of the depression. In less than a week, the stock market lost over 0ne-third its value and due to speculation, call loans and poor regulatory measures business and individuals lost billions of dollars. Banks failed as they had loaned money to investors and business and could not re-coup the funds.
The third and final cause was the instability in the European economy, already shattered by the debt produced from the first world war, when U.S. banks called the loans given to European countries they could not repay the debts.
These three factors created the domino effect that destabilized the global economy and plunged not only the United States, but the rest of the world in the Great Depression.
President Hoover's response was not only in-effective but, contributed to level of suffering by the American people. Hoover believed in personal responsibility and individual responsibility and was slow to commit government resources to alleviate the effects. Hoover felt that if the government got involved, the self reliance and independence of the American people would be lost. The other programs he created where ineffectual or had negative impacts that deepened the crisis instead of helping.
The overall lessons that should be taken from the depression are the need to regulation of the markets and securities, accurate financial reporting of manufacturing and business's and solid financial planning by both the nation and by individuals to ensure the solvency of our economy.
After WWI, the American economy was booming. Manufacturing of durable goods was at an all time high and the future of our nation looked extremely bright. But, slowly consumer purchasing began to slow and caused the manufacturers to slow production and reduce labor force. The U.S. agricultural industry was already in a deep recession with prices for crops and food stuffs at an unprecedented low.
The stock market crash of 1929, also known as Black Tuesday, is perhaps the most dramatic cause of the depression. In less than a week, the stock market lost over 0ne-third its value and due to speculation, call loans and poor regulatory measures business and individuals lost billions of dollars. Banks failed as they had loaned money to investors and business and could not re-coup the funds.
The third and final cause was the instability in the European economy, already shattered by the debt produced from the first world war, when U.S. banks called the loans given to European countries they could not repay the debts.
These three factors created the domino effect that destabilized the global economy and plunged not only the United States, but the rest of the world in the Great Depression.
President Hoover's response was not only in-effective but, contributed to level of suffering by the American people. Hoover believed in personal responsibility and individual responsibility and was slow to commit government resources to alleviate the effects. Hoover felt that if the government got involved, the self reliance and independence of the American people would be lost. The other programs he created where ineffectual or had negative impacts that deepened the crisis instead of helping.