Primary Causes For The Great Depression example essay topic

There were many primary causes for The Great Depression, Unequal distribution of money to the economy, and the stock market speculation, and much more which all played a major factor for The Great Depression. The Great Depression impacted everyone, it impacted different people of all kinds of backgrounds. It was a low time for Americans in the 1920's, and for other countries also. One of the causes were Uneven Prosperity, 0.1% of families made 100,000$ a year, and 80% had zero savings. 200 companies controlled 49% of all U. S industry which caused uneven prosperity. Although the economy was booming in the 1920's most purchasing was done by credit. U. S wealth was not spread evenly and the economy was unstable.

The U.S. economy was booming in the 1920's and Uneven prosperity made recovery difficult. People were buying thousands of shares of stock for as little as 10% down. Then people lost ten times as much as they put in. For the economy to function properly, total demand must equal total supply. In the 1920's there was an oversupply of goods. 60 percent of cars and 80 percent of radios were bought on credit.

The U.S. economy was also reliant upon luxury spending and investment from the rich to stay afloat during the 1920's. The significant problem with this reliance was that luxury spending and investment were based on the wealth's confidence in the U.S. economy. imbalance of wealth lead to large market crashes. Black Tuesday, 1929. People saw stocks were actually falling.

People hurried to get out of stocks and minimize their losses. As this happened, more people did the same which exacerbated the situations. On Black Tuesday, a record 16.4 million shared's were sold. This led to bank failures. Many people lost as much as ten times their initial investment in the crash of Black Tuesday Speculation in the 1920's caused many people to by stocks with loaned money and they used these stocks as collateral for buying more stocks. The stock market boom was very unsteady, because it was mostly borrowed money and false optimism.

When investors lost confidence, the stock market collapsed, taking them along with it. People loss confidence and since they were developing mistrust of the economic situation, many wanted there money out of banks and buried in their yards. The same thing that happened to the stock market. Banks ran out of cash and went bust. Few economic barriers existed to prevent total collapse. The banks that did survive had to foreclose on a number of loans, collecting cars, land, and houses that nobody had the money to buy from the banks.

As a result, these banks ended up with tons of property but no way to get cash from it. This cash shortage closed even more banks. With the economy falling in shambles and companies defaulting on loans, nearly all private and corporate investment ceased. Companies couldn't afford to expand-in fact, many had to consolidate in order to cover the margins on their loans. In doing so they stopped hiring more people and began laying people off. unemployment sky-rocketed. With people willing to work for less money-than companies were currently paying, wages lessened too.

Farmers and workers did not profit. Impact-All these changes affects the society in different ways. The Great Depression caused many people to close businesses and led the government to regulate the businesses and economic affairs. Depression hurt a lot of people, especially working people who lose there jobs. Bank failures clean out some depositors savings if funds are not ensured. When there was the depression, most people can not meet the house or apartment payments so they lose there homes and become homeless.

During a depression some people must live on charity just to support themselves and there families. Sometimes the people who get the charity money, clothes, and food get kind of embarrassed that they need the money and they feel ashamed that they can't afford to support themselves which is basically not their fault. The Great Depression caused lots of marriages and birth rates to decline... Such inventions as the automobile and color television spur business investments and consumer spending, causes expansion.

After demand for these products has been satisfied, spending drop offs resulting in contraction. Still other theories suggest that during expansion, business invest too heavily in buying. The expanded role of the federal government came to be accepted by most all Americans by the end of the 1930's. Even republicans who had bitterly opposed the new deal shifted there stance.

Wend le Wilkie the republican president nominee in 1940 declared that he couldn't oppose reform such as regulation of the security markets and the utility holding companies, the legal recognition of unions, or social security and unemployment allowances. What bothered him so much and not just him but other critics was extensions of the federal bureau cy. The great depression was the worst economic slump ever in the U. S History, and one which spread to virtually all of the industrialized world. However, the main causes for the depression was the combination of the greatly unequal distributions of wealth throughout the 1920's, and the extensive stock market speculation that took place during the latter part that same decade. The mal distribution of wealth in the 1920's existed on many levels. imbalance of wealth created an high, but eventually lead to large market crashes.

Another. However, the rewards of the 'coolidge prosperity' of the 1920's were not shared evenly among all Americans. According to a study done by the Brooking Institute, in 1929 the top. 1 percent of Americans had a combined income equal to the bottom 42 percent.

A major reason for this large and growing gap between the rich and the working - class people was that the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32 percent in manufacturing. During that same period of time average wages for manufacturing jobs increased only 8 per Essentially what happened in the 1920's was there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satisfied could not afford more, whereas the wealthy were satisfied by spending only a small portion of their income. (show overhead of fourth paragraph) Through such a period of imbalance, the U.S. came to rely upon two things in order for the economy to remain on an even keel which helped to decrease the chances of going through the depression: credit sales, and luxury spending and investment from the rich.

One obvious solution which might have stopped the depression was to let those who wanted goods to buy the products on credit. The concept of buying now and paying later caught on quickly. By the end of the 1920's, 60 percent of cars and 80 percent of radios were bought on installments credit. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from 1.38 billion dollars to around 3 billion dollars. Installment credit allowed on to 'telescope the future into the present', as the president's committee on Social Trends noted. This strategy created artificial demand for products which people could not ordinarily afford.

It put off the day of reckoning, but it made the downfall worse when it came. By telescoping the future into the present, when the 'future' arrived, there was little to buy that hadn't already been bought. In addition, people could no longer use their regular wages to purchase whatever items they didn't have yet, because so much of the wages went to paying back past purchases. The significant problem with this reliance was that luxury spending and investment were based on the wealth's confidence in the U.S. economy.

While savings and investment are important for an economy to stay balanced, at excessive levels that are not good. Greater investment usually means greater productivity which were not being distributed equally, the problems of income distribution were only made worse. Lastly, the search for ever greater returns on investments lead to wide - spread market speculations. So far, all these causes of depression might not be familiar with you but, they could affect the economy in great ways and that is why the Us. Economy has studied these causes so that they are prepared for the future. All of the causes that I have listed above are just the few causes to the Great depression.

In fact, there are lots of other minor or major causes. Can anyone at least name one cause. (show overhead of main causes). This would put more money in people's hands, inspire consumer confidence, and compel them to start spending again. A depression, Keynes believed, is an especially severe recession in which people hoard money no matter how much the central bank tries to expand the money supply. (show overhead of seventh paragraph) In that case, he suggested that government should do what the people were not: start spending. He called this 'priming the pump' of the economy.

Indeed, most economists believe that only massive U.S. defense spending in preparation for World War II cured the Great Depression. (Show overhead of Chart) 3.20% Hoover era, Great Depression begins 24.9 FDR, New Deal begins; contraction ends, March 19. Recession begins, May As you can see, Roosevelt began relatively modest deficit spending that arrested the slide of the economy and resulted in some astonishing growth numbers. When 1936 saw a phenomenal record of 14 percent growth.

Roosevelt eased back on the deficit spending, overly worried about balancing the budget. But this only caused the economy to slip back into a recession, as the above chart shows. I have been unable to find reliable economic growth figures from World War II, but as a generalization it is safe to say the economy exploded, experiencing it's greatest growth in the U. S history. Between 1940 and 1945, the GDP nearly doubled in size, form 832 billion dollars to 1559 billion dollars in constant 87 dollars. And this occurred as deficit spending soared, to levels Keynes had earlier and unsuccessfully recommended to Roosevelt.

Herbert Hoover was the last in a line of Republican presidents who firmly believed in and adhered to the principle of small government. Therefore, when the depression set in, he did all he could do in an effort to find solutions outside of government. This involved meeting informally with the leaders of business and agriculture, and allowing the economy to regulate itself. He was openly optimistic about the prospects of recovery during the first months of the depression. But, as the depression continued into 1930, and faced with deepening problems, he was forced to take action and extend the role of the government into the lives of the nation's citizens. Hoover's most notable foray into regulation of trade was his advocacy for the Smoot-Hawley Tariff in 1930.

The tariff protected many of the nation's largest imports, and 94 percent of the items were agricultural. This served only to expedite the contraction of the United States' foreign trade, since foreign nations responded to American tariffs with tariffs of their own tariffs or simply restricted trade with the US. The Smoot-Hawley Tariff represented the first step in the direction of government action to try to protect the nation's farmers. Hoover took other steps to this effect as well.

He oversaw the activity of the Federal Farm Board, which administered loans offered by the Department of Agriculture. By the end of its first year of existence, the Farm Board had loaned $148,616,194. Rather than force cutbacks in agricultural production, an interventionist plan abhorrent to Hoover, he created the Grain Stabilization Corporation. The Grain Stabilization Corporation bought wheat at high prices at the market to drive supply down and prices up. Hoover also dabbled in conservation and development. He supported a measure to add $3 billion to a federal fund for building forest roads and trails, a program that both attacked unemployment and developed valuable land.

Hoover took a very inactive position in regard to industry and big business up until 1930. After the onset of the depression, he met with many of the leaders of big business across the country, asking them to maintain wage levels and not to overreact to the economic decline. Many were cooperative for a short time, but in the end, faced with deepening depression, most corporations slashed wages and fired workers in increasing numbers. In the midterm elections of 1930 the nation delivered a resoundingly negative verdict on Hoover's attempts to stimulate business recovery. Republicans lost control of the House and lost seats in the Senate.

Faced with this repudiation of his efforts, he was forced to take action. He authorized $2 billion in funding for the creation of the Reconstruction Finance Corporation in January of 1932. The RFC, as it is abbreviated, was intended, in Hoover's words, 'to make temporary advances upon proper securities to established industries, railways, and financial institutions which cannot otherwise secure credit, and where such advances will protect the credit structure and stimulate employment. ' Under chairman Eugene Meyer and president Charles Dawes the RFC authorized $1,939,199,172 in loans during 1932.

However, this turn toward government involvement did not produce marked results in the agricultural or business sector, and did not reach deeply into the problem of unemployment. Hoover established the Emergency Committee for Employment in order to organize unemployment relief, but he gave the committee only limited resources with which to work. He remained, throughout his term, firmly opposed to the use of federal funds for public works programs. He rejected public relief in favor of private charity, which rarely had any effect on the unemployment problem during the depression. In a great demonstration of insensitivity to the problems of the nation, Hoover, in June of 1932, ordered the army to forcibly remove the destitute gathered in Washington D.C. participating in the demonstration known as The Shame of Anacostia Flats. Commentary Hoover is not considered by history to have been successful in combating the depression.

Indeed, his term saw the descent of the nation further and further into depression, and the approval of his policies declined accordingly. Hoover's biggest stumbling block was the fact that he was presented with a situation which required drastic action, yet his hands were tied by his adherence to the conservatism of his party and the politics which had gotten him elected in 1928. He was reluctant to take action until the situation was exceptionally dire, and when he finally did, it was with great reluctance. He remained committed to a conservative, small government political posture, despite criticism and political setbacks. He was eternally optimistic about the possibility for natural economic recovery with minimal governmental intervention.

When this didn't happen, and the populations turned against him, as evidenced in the elections of 1930, Hoover was forced to mobilize the government. But by that time, conditions had become adverse enough to condemn his efforts to failure. Many historians argue that while Hoover was not successful, he should not be indicted as a do-nothing president. In fact, his programs came closer to those which would later be undertaken by the New Deal than is usually acknowledged. This is true especially in the realm of agriculture. The Federal Farm Board and the conservation and development program initiated under Hoover bore remarkable resemblance to programs later initiated by FDR.

However, Hoover's reluctance to cut agricultural output held his programs back, as did the general feeling of hesitancy which permeated the measures enacted during his term. In the realm of unemployment and business, Hoover's actions are usually considered by liberal historians and economists to be, respectively, too little and too late. Hoover's handling of the nation's unemployment concerns was a public relations disaster, not to mention ineffective. While millions starved and were evicted, he refused to undertake extensive governmental measures in response. Instead, he suggested that the problem was one to be dealt with at the municipal level, which was bankrupt, or by private foundations, which were already spread quite thin or themselves defunct. The culmination of his dealings with the unemployed was the Shame of Anacostia Flats in 1932, where he ordered the demonstrators to be removed by armed forces.

This final insult to the impoverished, in an election year, sealed his fate in the coming election. The people did not see Hoover as a compassionate leader in touch with their needs. If Hoover's programs aimed at easing unemployment were 'too little,' then his programs aimed at stimulating business recovery were 'too late. ' His hesitation to initiate government action gave the economy time to spiral further downward and for his relations with the leaders of big business to sour.

The RFC, Hoover's only major attempt to aid the recovery of business and finance, pumped much needed capital into the economy, but it was little more than a bread line for business, according to its critics. The RFC simply gave handouts to businesses, rather than taking a role in shaping the ways in which those funds were used. Hoover eschewed direct governmental intervention under the principle of small government and free market economics. The experience of American citizens during Hoover's term left them desiring something new from the government. The nation demanded intelligent and effective governmental intervention to revive the flailing economy. They demanded a president who would be a hero and representative of his people rather than an aloof, un compassionate bureaucrat -- a departure from the do-nothing presidents of the 1920's.

Franklin Roosevelt, elected in 1932, strove to answer this call during the remaining years of the depression.