What Caused The Great Depression

Many people believe that the Great Depression was caused by the stock market crash in 1929 but there were other causes that lead to this crisis and not just the stock market crash. The Great Depression was the period of economic crisis that started in America but affected the whole world. The Great Depression came after the “roaring 20s”, the decade of prosperity in America. The Roaring 20s was when several new technological advancements helped make life easier and the invention of the assembly line by Henry Ford to allow a production to be mass produced of a item. By allowing mass productions, things that use to be very expensive and only for the rich, becomes really cheap and affordable. During this decade, the installment plan and the idea
of credit became very popular, where people could buy the item without paying the whole cost of the item and then pay a little each month with interest. Thus many Americans began to buy luxury items with the installment plan or credits and buying stocks hoping to get rich quick. Soon many Americans brought things with money that they do not really have and when the time comes to pay, no one has money to pay for it. This lead to a big loss in profits and business, which many people are then unemployed and in debt, and allow the Great Depression has fully surfaced. Major factors that lead to the Great Depression were the weak economy of farmers, and the uneven distribution of income.
World War I caused farmers to borrowed money and bought better tools to increase productivity and more land to produce more food. After the war was over, the need for surplus of food stopped, which led to the farmers over producing crops and they had to lower the price of their crops. Thus the farmers could not pay back the money they borrowed and found themselves in the same situation as the farmers during the shays rebellion in the late 18th century; they fall into debt and the bank foreclosed their land. Although, in the 1920s, many members of the lower class and middle class managed to buy usually luxury items like cars and radios although their income never improved. The assembly line allowed mass production of a product; will cause the price of the product to drop and cause the product to become over produced. When the supply of the consumer items is over the demand, they have to lower prices in order to make up for the of money they had to lay off workers. When many workers are fired, they will not have money to buy the low price consumer products, thus the items will only stay overproduced. When the products are not bought, the business loses money and soon into bankruptcy. Businesses went bankrupt because of America’s terrible banking system, which also played a part in causing the Great
Depression. Government policies was what led many of the banks lead to bankruptcy.
President Andrew Jackson hated central banking systems back in the 1830s and supported small institutions for banks, so in the 1920s there is a bad central banking system and most banks were small private institutions. After many workers were fired, they needed money that they deposited in the bank earlier to pay off their debts for installment and credits, the large amount of working class went to bank to withdraw that money but the bank did not have enough money. Many of the banks used their money on credits, and did not get the credit money back soon enough, so the banks would go bankrupt. The government hoped to quickly fixed the problem before it turned into the Great Depression, so they increased the tariffs in hopes to have people buy american products and bring the economy back to normal. That did not help instead it only hurt the farmers and international trading. Because of the high tariffs, many nations lower the trading with America, so Europe also began to go into a economic crisis. When European countries like France and England go into a depression and they demand the reparations, World War I war payments, from Germany. Germany did not have that money, so they have to borrow from American banks in order to pay back to France and England and when the banks needed that money to give back the citizens, who deposited money in the banks, they already used the money on credit and borrowing money
to Germany. Which led to the banks going to bankruptcy. The Great Depression was only caused by the stock market crash in 1929 but it involves many factors like government policies, weak banking systems, and overproduction that was caused before the crash. The Great Depression is actually very similar to other events in history. The Shay’s Rebellion in the 18th century where many farmers bought land to increase profit during the American revolution but only resulted to foreclosure of the lands and because of the terrible government system, Articles of Confederation, it did not do much to help. Another event in modern history, would be the stock market crash in 2008. This crash caused the American economy return to a state depression.