Cause Of The Great Depression Essay

The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit. If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the Stock Market Crash, but also on the maldistribution of wealth, an unstable economy and the wild stock market practices of the 1920’s. The largest reason for the growing gap between the rich and the working-class people was the sudden increase in manufacturing during the 1920’s.

Big banks were in trouble as well, many investing recklessly in the stock market then losing it all when the stock market crashed in 1929. The fourth factor was Americas position in the international trade market. In the late 20's, Europe's demand for American goods began to decline, partly because their industry was becoming more productive and partially because their economy was destabilized from the international debt structure that emerged in the aftermath of WW1. The international debt structure was a fifth and final factor contributing to the Great Depression. At the end of the war in 1918, all the European nations that had been allied with the US owed large sums of money to American banks and could not repay them with their shattered economies.

If this did happen investment might fall, parts of the stock market might not be able to pay back debts, and even worse recession might result (Galbraith 118). The Federal Reserve in 1928 tried to make borrowing money for stock speculation more difficult and very costly by raising interest rates. All of the options that the Reserve tried had unfavorable risks associated with them. Many economists believed that the Federal Reserve was responsible for the recession. The stock market did crash on October 29 1929.

1 - Compose an essay which summarizes the root causes of the Great Depression. Then compare and contrast how Presidents Hoover and Roosevelt went about dealing with the worst economic depression in American history. What fundamental economic principles were each influenced by and cite examples of their policies. The Great Depression was quick and detrimental to the U.S. market. With the banks making loans to people to invest in stocks, when the stocks started to crash there was a large amount of panic selling causing a great many numbers of businesses that when bankrupt.

On the 29th of October 1929, Wall Street, the American (US) stock exchange, collapsed starting the beginning a period known as ‘The Great Depression’ in America; this was in result of multiple causes which started in 1921. These causes caused the US to go from the ‘Roaring Twenties’ into the depression. The President was Herbert Hoover (1929-32) and before him was Calvin Coolidge (1923-29), both republicans, who cared more about the big businesses rather than the farmers and the workers. With a government focused on isolating the country and banks giving out huge loans it showed that the US had more than just one problem. Though the laissez-fare policy was a huge contributing factor, it could have been the sole factor for the stock exchange collapse as its policy of not interfering caused lots of problems.

By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession. It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates.

The federal government also helped to make the growing gap between the upper and middle classes. President Calvin ... ... middle of paper ... ...yers were available at any price (EV 549). This speculation and the resulting stock market crash acted as a trigger to the already unstable U.S. economy. Due to the poor distribution of wealth, the economy of the 1920’s was one very much dependent upon confidence. President Hoover stated, “…the crisis has been isolated to the stock market itself.” (Docs Hoover).

(Scaliger egot Americans defaulted because of the lack of money being circulated. Deflation was a huge factor that drove America into the Great Depression. There were many factors that caused the Great Depression from the banks creating IOU’s to deflation. This economic crash was due to the capitalist system of the United States Federal Reserve on top of the many band-aids that were implemented. Before the 1920’s, the average worker could not borrow money.

CLOSING STATEMENT: although, … Businesses were also affected by the Stock Market Crash. Many businesses were already struggling so the crash hurt them even more. “With money scarce, banks and investors were suddenly unwilling or unable to provide industry with the money it needed to gr... ... middle of paper ... ...oblems here in the United States started happening overseas. There was a high tariff put on products that were needed to be exported to other countries which caused more harm to other economies. It is easy to see that the Stock Market Crash was a horrible event for America.

October 29th, 1929 marked the beginning of the Great Depression, a depression that forever changed the United States of America. The Stock Market collapse was unavoidable considering the lavish life style of the 1920’s. Some of the ominous signs leading up to the crash was that there was a high unemployment rate, automobile sales were down, and many farms were failing. Consumerism played a key role in the Stock Market Crash of 1929 because Americans speculated on the stocks hoping they would grow in their favor. They would invest in these stocks at a low rate which gave them a false sense of wealth causing them to invest in even more stocks at the same low rate.