Causes of the Great Depression

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Recommended: Chapter 12 causes of the great depression

The Great Depression was the most catastrophic economic disaster in American history. It affected all of the US from sea to beautiful shining sea. Old and young, rich and poor, black and white, everyone suffered the consequences of the over extravagant Roaring Twenties. Businesses closed, everyone was up to their neck in debt, banks failed, and the mid-west was soon a dust bowl from over farming and reclaimed equipment. With the Smoot-Hawley Tariff in place, deflation, everything imaginable bought on credit, and unreliable loans, everything adding up eventually led to the stock market crashing and the Great Depression.

The Great Depression was caused by one main thing, the Smoot-Hawley Tariff. Enacted in June of 1930, this tariff inflated the price of imported goods up to fifty percent. This was done by President Hoover to “increase [American] farmer protection against agricultural imports” (Investopedia.com). A mass number of economists signed a petition to stop his rash actions because they foresaw the backlash of other countries and the fact that “[they] cannot increase employment by restricting trade” (“The Baltimore Sun”-newspaper article by Thomas Sowell). The Smoot-Hawley Tariff Act was passed anyway and, just as the petitioners predicted, foreign countries increased their own tariffs on American merchandise causing businesses to close and prices of goods to go up. On the contrary to inflation, Gross Domestic Product and consumer confidence deflated in effect to all the vanishing businesses [farms-the dust bowl] and unemployment. In reaction to this horrific event, President Roosevelt passed the Reciprocal Trade Agreements Act in 1934 encouraging global trade and supporting the General Agreement on Tariffs and Trade (GATT...

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.... When nothing could grow because a burst of wind would send a dust cloud half a mile or more high, farmers could not pay their debt or loans back to the banks leading the banks to fail and businesses to close and thus the downward spiral began towards the Great Depression (“Half Broke Horses” by Jeannette Walls).

The Great Depression was the most catastrophic economic disaster in American history, and was highly avoidable. Although it may have caused many horrific events to happen, the depression was a valuable lesson to America and the entire world. Now, we know to avoid outrageously high tariffs, extreme deflation, excessive “credit buying”, and innumerable loans. But we still haven’t evolved out of our greedy, dense minds.

Works Cited

Investopedia.com
The Baltimore Sun
League of Nations' World Economic Survey
USlegal.com
Half Broke Horses by Jeannette Walls

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