What caused the Great Depression

The Great Depression was the worst economic downturn in the history of the industrilaized world, lasting from the stock market crash of 1929 to 1939.

Throughout the 1920s, the U.S. economy expanded rapidly, and the nation’s total wealth more than doubled between 1920 and 1929. The New York Stock Exchange in Wall Street in New York City was a center for reckless speculation, where everyone from millionaire tycoons to cooks and janitors poured their savings into stocks. As a result, the stock market underwent rapid expansion, reaching the peak in August 1929.

By then, production had already declined and unemployment had risen, leaving stock prices much higher than their actual value. Additionally, wages at that time were low, consumer debt was multiplying, the agricultural sector of the economy was struggling due to drought and falling food prices and banks had an excess of large loans that could not beliquidated.

The American economy entered a mild recession during the summer of 1929, as consumer spending slowed and unsold goods began to pile up, which in turn slowed factory production. Nonetheless, stock prices continued to rise, and by the fall of that year had reached strotospheric levels that could not be justified by expected future earnings.On October 24, 1929,as nervous investors began selling overpriced shares en masse, the stock market crash that some had feared happened at last. A record 12.9 million shares were traded that day, known as “Black Thursday”.

Five days later, on October 29 or “Black Tuesday”, some 16 million shares were traded after another wave of panic swept Wall Street. Millions of shares ended up worthless, and those investorss who had bought stocks “on margin” (with borrowed money) were wiped out compleytely.

As consumer confidence vanished in the wake of the stock market crash, the downturn in spending and investment led factories and other businesses to slow down production and begin firing workers. For those who were lucky enough to remain employed, wages fell and buying power decreased. Many Americans forced to buy on credit fell into debt, and the number of foreclosures and repossessions climbed steadily. The global adherence to the gold standard, which joined countries around the world in a fixed currency exchange, helped spread evonomic woes from the United States throughout the world, especially Europe.

Categories: Culture and History

Tagged as: ,