What Is The Cause Of The Great Depression In The United States

The United States had been the strongest nation in the world until the Great Depression hit. The Great Depression was a time period where the United states were hurting financially. Many people often refer to the Great Depression was due to the Stock Market crash of 1929. That is simply not true. The Great Depression was not caused by one single event or even happened over night. Several Factors can be contributed to the creation of the Great Depression.
The United States before the Great Depression. The economy of the United States was booming during the 1920s. The United States during the 1920s were often referred to the Roaring Twenties. During this time period the United States was experiencing an amazing economic boom. There was mass production in the manufacturing, telecommunication, movie and chemical sectors (DeGrace). The United States were experiencing the greatest moments in US history up to that moment. People were trying new things. For example, Women were wearing shorter dressing, one piece swimsuits, and were getting haircuts to where their hair wasn’t
even touching their shoulders. This economic boom had set up the 1920s to the point the US never thought or even imagined that they would be turmoil ten years later.
The causes of the Great Depression.
The agriculture industry was on the rise during World War One when Europe was in ruins. The United States decided to take over the industry as they had plenty of land to grow food for Europe and Europe was unable to produce their own goods. The government of the United States had promised many Midwest farmers certain prices during World War One. As a result, farmers decided to cultivate more acres and get loans from banks to fund such actions (Morain). Once Europe was out of the war, they could now use terrain that was used with war for agriculture purposes. This was a bad thing for American farmers, as they could no longer sell their crops at guaranteed prices. Farmers continued to produce at high rates, which created a surplus. People who had borrowed money from the banks were now in debt as they were not making as much money during World War One. The farmers were forced to sell farms in order to get out of debt. Some even sold their farms to find themselves still in debt (Morain). The agriculture industry made a lot of people go into debt and lose a lot of their land. The Lack of diversification had also played a critical role in the creation of the Great Depression. The main sectors of prospering were construction and automotive industries. The United States were solely dependent on these two industries. Both of these industries were booming in the 1920s. “Between 1926 and 1929, expenditures on construction fell from $11 billion to under $9 billion (Great Depression).” In just three years, the amount of money in construction fell by 2 billion dollars. This means many people have a lot less to spend on building things. This in turn would mean unemployment as employers would not have as much to fund employees any more. “Automobile sales began to decline somewhat later, but in the first nine months of 1929 they declined by more than one third (Great Depression).” The automobile used to be a luxury before the 1920s, but Henry Ford had made an automobile affordable to all. This had started the craze for the Model T. Many people were able to buy a Model T during the 1920s. They also saw an employment opportunity to build cars in factories. Once the Automobile industry had declined in 1929, many people were laid off and were left with no job. The United States had focused too much of their time into two industries that once they started to fail it left many without a job.
The Stock Market of the United States is the biggest contributors to the Great Depression. October 29, 1929 or otherwise known as Black Tuesday is when the stocks in the United States reached the lowest point. Although the stock had been struggling for months prior to this Black Tuesday was the tipping point. “Two months after the original crash in October, stockholders had lost more than 40 billion dollars (Kelly).” This amount in today’s standards is unimaginable. Back in the 1920s, this amount would have been much worse as 40 billion dollars would be somewhere around 500 billion dollars. The United States had regained some of the money back, but not to the extent to make up for the losses(Kelly). The Stock Market can be considered to be one of the greatest contributors to the Great Depression. Bank Failures are another reason for the Great Depression.
“Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings(Kelly).” Banks were failing to due to installment payments. Back in the 1920s the United States didn’t have a credit system, therefore making it easy for someone to take out loans. Many banks would carelessly loan out money as people never had to prove to them that they were trustworthy people. People would grab loans to buy the new technology that was created during the 1920s. When the Great Depression hit no one could pay off the loans so these people were in extreme debt. They bank would then fail as they were unable to make money and unable to give people their money when they demanded it. Bank failures caused many people to lose large amounts of money, which would perfectly set up the Great
Depression.