Great Depression

Causes of the Great Depression

Most historians agree that the greatest cause of the Great Depression was overproduction. The economy had been booming during the 1920's to a point that most industries were making so much of everything that there was a limit to that amount that could be sold.


Speculation by not only individuals but banks also led to the Depression. Individuals did not buy stocks to improve or invest in a company but to delve into the market just long enough to make a profit. This proved to be very lucrative during the 1920's but when the "bubble" burst on stock prices, the situation left many in over their heads.


The stock market crashed in 1927. The reason for this is that all of the stocks and bonds crashed - leaving thousands who invested in companies virtually broke. There was an immediate scare on Wall Street, in which all of the people who owned stocks decided to sell at once - which created a massive problem for the stock market. Even the large companies went from their stocks reading 100+ to less than 5 dollars a share.


depression started back during the dust bowl, and it was already starting to trickle through the economy when the stock market crashed, then people panicked, and tried to take all their money out of the banks, causing the collapse of most small and medium banks. people defaulted on loans because there was no money and there was more workers than work

Summary:Underconsumption (not enough purchases) and over investment (economic bubble), malfeasance by bankers and industrialists or incompetence by government officials are pointed to for causing the Depression.

Effect

Furthermore, the debt became heavier, because prices and incomes fell 20–50%, but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 banks failed. In all, 9,000 banks failed during the decade of the 30s. By 1933, depositors saw $140 billion of their deposits disappear due to uninsured bank failures. Bank failures snowballed as desperate bankers tried calling in loans which the borrowers did not have time or money to repay.


As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.


While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves. This was the topic of John Steinbeck's The Grapes of Wrath.

Source:

Solving the problem

When all of these events happened the US tried to call in loans from around the world but it was too late. The economic crisis had become one that was no longer bound to the confines of the US