The Causes of the Great Depression

Speculation only worked if the stock market was on the rise though. To this day people who have not been properly educated about the Great Depression believe that President Hoover was the cause. The idea that President Herbert Hoover caused the Depression could have arisen from the fact that he was the President at the time the Depression began. However, the people who do not believe that President Hoover was the cause deem the crash of the stock market in 1929 as the real culprit. The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit.

What events led up to the economic failure? Was the government aware that the crash was coming? Traditionally, President Roosevelt has been lauded as a savior of the economy and one of the greatest presidents the United States has ever had. However, there is another way to look at the causes of the Great Depression. Average working individuals went into debt stocks had no defined value, but was based upon demand.

Even though there was an abundance of goods mass produced and at a cheap price because of that, so many people now had no jobs so the goods were not being purchased. Even though, from 1920 to 1929, consumerism and overproduction partially caused the Great Depression, the unequal distribution of wealth and income was the most significant catalyst. From 1920 to 1929 consumerism partially caused the Great Depression due to speculation and installment buying. Speculation is the act of investing in a stock with the hope of a big gain but the risk of a big loss. Many of the investors were sure that the stocks they were going to buy were going to grow, therefore they received big loans that, once the market crashed and all the money was gone, they could never pay b... ... middle of paper ... ...e excessive speculation in the late 1920's kept the stock market artificially high, but inevitably led to the big crash.

A group on bankers gathered together and after the short meeting they had, they announced they are going to buy the stock shares on the market. Bankers bought those stocks with the millions of dollars their banks produce. There were some problems when it came to agreements on prices though but after a day or two the public confidence was returned. President Hoover reassured his nation by saying “The fundamental business of the country – that is, the production and distribution of goods and services – is on a sound and rich basis.” The business of the country was not actually sound based. The economists were saying factories were producing more goods than even workers or consumers will be able to buy, in other words, the consumers would not be able to afford.

A few low and middle class American’s wanted to participate in the market so they sought out loans from banks. Banks were more than obliged to give loans as long as they had collateral to offer the bank. Unfortunately, banks were accepting stocks as collateral from loaners. Little did the banks know that the Crash of 1929 would lead them to bankruptcy and cause a major loss for their clients. Banks were left with useless stocks and were unable to function properly as they did not have money to give to clients and the clients did not have money to pay back

Some of the main causes of the great depression were that there was overproduction of food and also industrial parts, banks gave out too many loans and at the end people could not pay them, and also the stock market crash of 1929. Farmers in the western world produced more food than Americans needed. Farmers then couldn’t sell the food and then lost their farms. Industrial workers produced too many things. Workers couldn’t buy goods.

Speculators who borrowed money from the banks to buy their stocks could not repay the loans because they could not sell stocks. This caused many banks to fail. Since bank deposits were uninsured before the 1930s depositors' their money, which in many cases was all that many people had. The stock market crash intensified the course of the Great Depression in many ways. Besides wiping out the savings of thousands, it hurt commercial banks that had invested heavily in corporate stocks.

(New York Stock Exchange) This investment was hoping that people could make a profit and repay the loans they made. But just as one would expect, events didn’t unfold as planned. When the stocks ended up crashing, people were completely out of money, and had nothing to give to repay the banks, which were also in need of money. The crashing of the stocks was a pivotal moment, and eventually led to the Great Depression In the 1920s Americans naively believed that the economy... ... middle of paper ... ...n, was one of the most traumatic events The United States has endured. With the deadly combination of faulty investments, false assumptions of prosperity, and naive economic decisions, America was plunged into a depression.

Most of the nation’s banks also failed because they had to put the depositors money in the stock market to increase but when it crashed people lost most of their money. Many people started to lose faith in the stock market and “you can’t have a healthy economy without confidence in the market.” When banks and businesses started to close many people became unemployed and then people can’t afford food for themselves or for their family. People started to take loans from banks but then couldn’t repay the banks and the banks couldn’t let their depositors withdraw any money because it is all gone or given for loans. From the start of the depression the United States economy was going down day by day. President Roosevelt had closed all the banks for three days and then some banks opened backed up with strict limits on withdrawals.

The Depression was a period of time after the economic boom of the 1920's in America, when the economy went downhill. People lost money, jobs, shares, businusses went bankrupt and the farming industry suffered greatly. The Republic Government at the time lead by Hoover was still following policies of Lassez Faire so business was not getting the support it needed to get it back on track. The Republic Governments Protectionist policies were one of the causes of the great depression. There were trade problems associated with their protectionist policies.