Causes Of The Great Depression Essay

The Great Depression Cause And Effect Essay
It was October 29, 1929, also known as black Tuesday. The Great Depression had begun. We are
going to backtrack a little–bit to before the depression. The Depression was during the 30's, the main
idea here is the "causes", including: the roaring 20's, Black Tuesday, and bank failures. The roaring
20's was a time of electricity and new inventions such as the automobile. Everybody wanted all of
these new things although they did not have any money. The strategy they used–installments. They
asked the bank or others for some money and then bought the stuff they wanted. This brought the
middle–class living like the rich. Not only did the roaring 20's bring the Great Depression after, but it
failed banks all over America. The banks were now failing leading up to black tuesday. They were
loaning other people's' savings even if the payback was very unlikely. Also when folks noticed that
the market was crashing they were taking their life savings out, costing all the money to be gone in
a matter of weeks. Today–because of the "New Deal"–the bank insures you up to "this amount" if the
bank fails. Back then this wasn't the...show more content...
With over 16 million stocks sold on Wall Street, stocks were now almost worthless and money was
gone. Billions of dollars were lost, leaving many business owners out of money, or work. Not only
did this stock crash hit America, but the whole industrialized world. This was just the major turning
point of the long, harsh, downward spiral from 1929–1939 (the Great Depression). There are many
more causes such as the Federal Reverend, or President Hoover's actions. But the main reasons–I
feel–were these three topics, the roaring 20's, bank failures, and Black Tuesday. If President
Roosevelt had not taken the federal leed and put America in the first step, WW2 would not have
brought America out of the Depression. The New Deal and it's takes were a great lead out of the
Great
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Great Depression Causes
Causes of The Great Depression in the United States
The Great Depression was a worldwide economic downturn or depression in 1930s. It is believed
to have originated in the United Sates of America. In the United States, the causes of The Great
Depression have however, remained debatable. Most Historians claim that the stock market crash of
1929 was the major cause of The Great Depression in the United States . on the other hand, Witcher
and Horton (2013) claims that poor Monitory policies by the government in the 1920s and
legislative restrictions of branch banking together with easy money which, in turn led to
malinvestment were the main factors that contributed to the occurrence of The Great Depression .
In simple terms, after the election of Warren G. Harding in 1920, his Republican Administration
lowered taxes for businesses and reduced government involvement in businesses. These policies
together with advancement in technology enabled businesses to boom which in turn increased
production tremendously resulting in reduced prices of goods in the late 1920s. Additionally, the
Monitory policy encouraged credit expansion when the Federal Reserve encouraged small banks
to give large or more loans to farmers who were already no economically stable . To make matters
worse, small banks failed since they held less money in hand because a good chunk of the money
was in Federal Reserves .
To further investigate the causes of The Great Depression in the United States, some events

Causes Of The Great Depression Essay
Causes of the Great Depression The greatest financial crisis to have occurred in history was not
caused by just one event, but rather by multiple events, though some contributed to the crisis more
than others. The first cause of the Great Depression was the maldistribution of wealth that occurred
among the population. The second most important cause of the Great Depression was the instability
of the structures of both the credit and debt markets. The last main cause of the Great Depression
was the shrinking demand for American produced goods from European nations. The most important
cause of the Great Depression is the maldistribution of wealth. The reason for choosing this, as the
most important cause because it is mentioned in the Brinkley...show more content...
The reason I chose this as my second cause of the Great Depression is because these markets
control both the flow of money and the rates that money can be borrowed at. The credit market
was in trouble according to Brinkley because large banks had been making bad loans and small
banks were having customers default on their loans. The debt structure at the time was also in
shambles according to Brinkley as American banks held large European debts that stemmed from
World War One, which also left the economies of the European nations involved in pieces. With
these nations' economies not being strong enough to off their debts the allied nations made
Austria and Germany pay reparations to them for the damage caused by the war. However this
plan failed because both the German and Austrian economies were also in trouble as well and
couldn't pay the reparations they owed. So once the plan failed Brinkley says "American banks
began making large loans to European governments with which they paid off their earlier loans."
(Brinkley). With large amounts of money being tied up in European debt and consumers defaulting
on their loans it isn't hard to see how the flow of cash decreased to low levels, causing the demand
for goods to drop not just in Europe but also around the

Essay on The Causes of the Great Depression
The Causes of The Great Depression History Imagine waking up one morning, only to find out
that all your investments and savings are gone. So if your bank that you invested all your money
in collapsed, you didn't get any money back. This is what happened to millions of Americans
during the 1930s. This era was called the great depression. The great depression was one of the
worst economy issues we have ever had in history. It was a hard time for everyone. The great
depression started in 1929 till 1939. Tons of banks closed down and about 9 million savings
accounts were lost. Tons of companies and factories went under. About 15 million people were
unemployed. There are many causes of the great depression. One main cause was the...show more
content...
It got so bad due to a misunderstanding of a slump by American policymakers. This became a
problem. In the 1920's the U.S. economy was booming. The value of stocks were rising and
being bought. People were buying tons of stocks. They put as little as ten percent in. Then
everything started tumbling down and people lost about ten times as much as they put in. Tons
of people saw the stocks falling, literally. People were trying to hurry and get rid of their stocks
they bought to try and save some of their money. When more and more people were getting rid of
their stocks it just made the situation worst. J.P. Morgan tried to save the economy by putting
billions of dollars in certain banks. This became the stock market crash. This day, October 24,
1929, became known as Black Tuesday. In the crash, people lost ten times as much as they put in.
After all that everyone lost there trust in the economy. Many people wanted to take their money
out of the bank. Banks were running out of money. Because of the cash shortage many banks got
closed down. Now all the companies are having troubles. With the economy falling companies
couldn't pay their loans off. Many companies had to combine together in order to cover their loans.
Companies stopped hiring people and began to lay off people. Because nobody could afford to hire
anyone the unemployment rate got extremely high. Prices also rose by companies to try and make
some profit off the

Causes of the Great Depression Essay
The Great Depression remains to be the worst economic slump ever in American history and one
which spread practically all over the industrialized world. The Depression bombarded in late 1929
and lasted nearly a decade. Many factors elemented the depth of the widespread prosperity. However,
combined, the greatly unequal distribution of wealth throughout the 1920's and the extensive stock
market speculation that took place during the latter part that same decade remain the key of all
elements. The distribution of wealth in the 1920's was disparate and largely dispersed where funds
were randomly needed. Between the rich and the middle–class, between industry and agriculture
within the United States, and between the U.S. and Europe were...show more content...
A 1932 article in Current History articulates the problems of this maldistribution of wealth:
We still pray to be given each day our daily bread. Yet there is too much bread, too much wheat
and corn, meat and oil and almost every other commodity required by man for his subsistence and
material happiness. We are not able to purchase the abundance that modern methods of agriculture,
mining and manufacturing make available in such bountiful quantities. Three quarters of the U.S.
population would spend essentially all of their yearly incomes to purchase consumer goods such
as food, clothes, radios, and cars. These were the poor and middle class: families with incomes
around, or usually less than, $2,500 a year. The bottom three quarters of the population had a total
income of less than 45% of the combined national income; the top 25% of the population took in
more than 55% of the national income. While the wealthy too purchased consumer goods, a family
earning $100,000 could not be expected to eat 40 times more than a family that only earned $2,500 a
year, or buy 40 cars, 40 radios, or 40 houses.
Through such a period of imbalance, the U.S. relied mainly upon two things in order for the
economy to remain on an even keel: credit sales and luxury spending and investment from the rich.
One obvious solution to the problem of the vast majority of the

In the 1920s, American economy had a great time. The vast majority of Americans in 1929
foresaw a continuation of the dizzying economic growth that had taken place in most of the
decade. However, the prices of stock crested in early September of 1929. The price of stock fell
gradually during most of September and early October. On "Black Tuesday" 29 October 1929, the
stock market fell by forty points. After that, a historically great and long economic depression started
and lasted until the start of the Second World War. The three causes of theGreat Depression are
installment buying, uneven distribution of wealth and the irrational behavior in the stock market.
Installment buying serves as the first cause of the Great Depression. In...show more content...
When demand leveled off, factory owners had to cut back production and their workforce. Layoff
began in some industries like automobile industry as early as 1928, making ordinary citizens
unemployed. As unemployment increased quickly and vastly, a great depression seemed imminent.
Uneven distribution of wealth serves as another cause of the Great Depression. America was
wealthy in the 1920s, but this wealth did not extend to all segment of the society. The gains made
by wealthy Americans in the 1920s far outstripped gained made by the working class. By the time of
the stock market crash, the upper one percent of the population controlled over sixty percent of the
nation's savings. On the other hand, over three quarters of American families made less than $3000 a
year. Problems that could develop from this situation were obvious. The bottom–line three–quarters
of families were too poor to purchase much to help the economics to flourish. Underconsumption,
in the long run, was a vicious circle to the economy. People had no money to spend. The income of
many firms dwindled. More people were laid off or cut hours and thus further cut their spending.
The economics became stagnant. The irrational behavior in the stock market also precipitated the
depression. There were cases in the late 1920s of ordinary citizens becoming very wealthy by
purchasing stock. Some of these people were engaged in speculation, meaning

Many people speculate that the stock market crash of 1929 was the main cause of The Great
Depression. In fact, The Great Depression was caused by a series of factors, and the effects of the
depression were felt for many years after the stock market crash of 1929. By looking at the stock
market crash of 1929, bank failures, reduction of purchasing, American economic policy with
Europe, and drought conditions, it becomes apparent that The Great Depression was caused by more
than just the stock market crash. The effects were detrimental beyond the financial crisis
experienced during this time period. The first and most obvious known factor in the development of
The Great Depression is the stock market crash of 1929. The Money Alert website...show more
content...
The banking industry as a whole after the stock market crashed was going bankrupt due to not
being able to carry the "bad debt" that was created from using customer money to buy stock.
Because the banks were out of money, they were unable to cover customer withdrawals from their
bank, causing many bank customers to lose all of their savings. With the uncertainty of the future
of the banking industry, many people withdrew all of their savings, which caused more than 9,000
banks to close their doors and go out of business (Kelly). Due to the effects of the Great Depression,
and the collapse of the banking industry, the government created regulations to prevent similar
failure in the future. For Example, the SEC, (or Securities Exchange Commission), which regulates
the sell and trade of stocks, bonds and other investments was created as a result of The Great
Depression. The FDIC (or Federal Deposit Insurance Corporation), was created to insure bank
accounts so that that the consumer would be protected if the bank were to go out of business
(Kelly). The Great Depression's effect on the banking industry led to many useful changes to the
banking industry and helped restore confidence in banks in the American people. The next major
factor that contributed to the Great Depression was the reduction of goods being purchased during
the time period. After the stock market crashed, consumers from

The Cause Of The Great Depression
In the summer of 1929 the American economy started a downward spiral into what would later be
known as the Great Depression. Consumers ceased to purchase unnecessary items and unsold
products began to stockpile in manufacturer's warehouses. 6This slowed manufacturing and
production. 5Although the companies did not have an increase in value, their stock prices continued
to rise. 3Finally, in October of that same year, the stock market crashed. Investors panicked and
suddenly flooded the market with their shares. Black Thursday and Black Tuesday, the two most
notable days of stock sales, are known for when approximately 29 million shares were sold.
Following that, consumers lost confidence and hesitated to spend their disposable cash which

The Great Depression to place in the 1930's, wreaking havoc on America's economy. It cause
unemployment, poverty, homelessness, and a loss of a lot of money, including people's life
savings. Many things lead up to it, but one of the main ones was the stock market crash. People
believed that the stock market was as stable as could be, but it was very inflated and it crashed.
People invested a lot of their savings into stocks as what was considered a smart move, yet as
corporations reached their limit, everyone pulled their money which caused it to crash. The release
of "one–time buy" products also lead to the crash, because people would buy new products you only
needed one of, and once everyone had them, companies didn't sell as much, therefore making less
money, therefore forced to cut costs, which meant laying people off. This is what lead to the high
unemployment rates. People blamed this depression on the president at the time, Herbert Hoover.
They ridiculed him, by calling shanty shacks hoovervilles and leaving their empty pockets inside
out, calling them hoover flags. The public was more than happy when Franklin D. Roosevelt came
into office. All that American denizens wanted was to make it out of the hard times, make changes
in the government, and get help from them. Unlike Herbert Hoover, FDR took a more hands on
approach, giving direct aid to the public. Hoover believed in rugged individualism, expecting that
people should be able to work together and get through

Essay On The Causes Of The Great Depression
The Great Depression was characterized as the worst economic depression, and it was during the
time period of the 1930s. This depression was not caused particularly by one factor but a
combination of several worldwide and domestic conditions. The major causes of the Great
Depression consisted of the stock market crash of 1929, failures in banks, reduction in purchasing
products, and the economic policy between America and Europe. The stock market of 1929 was the
initial reason that drove us into the Great Depression as after the crash, stock holders started to lose
billions of dollars. Many banks started, and at this time, bank deposits were not insured and this
led to all the money saved in the bank by people being lost due to the failure of the banks. And,
the banks which actually survived stopped creating new loans in fear of failure and not enough
money. Due to the crash of the stock market and fright of economic problems, people began to stop
purchasing products, which led to the reduction in the workforce and a loss of a lot of jobs due to
money problems. The unemployment rate was constantly increasing as many people would decrease
the amount of items purchased drastically. Lastly, due to the failure of...show more content...
Social activity engagement with family and friends helped alleviate the melancholy caused by the
great depression. Families made food and gave to schools and other activities to make them run
smoothly, adults hung out together, children played, and entertainment helped people stop focusing
on their problems. The Great Depression transformed America by greatly expanding the role of the
government. Americans began to view the national government with a different perspective as the
federal government took initiative and helped people deal with the Great Depression with many
programs and

What Caused The Great Depression Essay
Imagine a society where over 25% of the population was unemployed. That is what it reached during
The Great Depression ("The Great Depression"). During the depression unemployment rates were the
highest they have ever been. It is highly speculated to this day on what exactly caused The Great
Depression. Most historians agree it was a chain of events, one after another, that brought our
country into chaos. Some events were more impactful than others. These events caused
pandemonium among the public, which blew it even more out of proportion by trying to save
themselves from bankruptcy. The three major events that caused The Great Depression were the
Stock Market Crash of 1929, the bank crisis, and public overreaction. Although...show more content...
This event created a domino effect that helped lead to The Great Depression. The second major
event in this chain was the banking crisis. Before The Great Depression hit, our countries banking
system was characterized by having numerous small to medium sized firms, which meant they were
prone to going bankrupt. As I previously stated, banks had been extremely over–generous with
handing out loans. A good percent of these loans was invested into the stock market and lost when
it crashed. Some banks even invested depositors' money themselves into the stock market. The
investors were unable to pay back the money to the banks and banks started going under. Bank
policies during this time were very poor. They did not have guarantees to their customers that if
the bank failed, they would be reimbursed for the deposits like we have nowadays. This caused
depositors to rush and withdraw their money, and banks were forced out of business because they
didn't have all the money. By the inauguration of Franklin D. Roosevelt in 1933, the banking system
had practically ceased to function. Checks were unable to be trusted because nobody knew if they
were worthless or sound (Ganzel). All this pandemonium with the banking system caused the public
to panic and make it worse. The public contributed to starting The Great Depression in many ways.
They affected the stock market by being too quick to panic–sell their stocks. Since in this time
stocks only

What Caused The Great Depression Essay
Causes of the Great Depression
By: Hamzah Abouseta
The great depression during the 1930's was a social and economic shock that left millions of people
unemployed, hungry and often homeless, specifically in Canada and the United States. There are
many reasons that have caused this tragedy such as the stock market crash, bank failures, and the
reduction of purchasing across the board.
The stock market crash was the main cause of the great depression in the 1930's. Many people have
been investing in the stock market at this time because it seemed as if the stock market would just
keep going up forever. People and investors were so desperate to buy stocks that they even
purchased stocks on margin, which is the borrowing money from a broker in...show more content...
Even though the stock market began to regain some of its losses, by the end of 1930, it just was
not enough and America truly entered what is called the Great Depression (Harold, 1992).
Moreover, another cause of the great depression which was also a huge cause of the great
depression was bank failures. Many banks had invested the people's deposits in the stock market,
causing these banks to lose their depositors savings as stocks plunged. Now the entire country was
in despair as all the cash that have been put in banks and stocks have just vanished, from filthy rich
to dirt poor. Furthermore, the reduction in purchasing Across the Board was another cause of the
great depression. Before the stock market crash, companies were making too much of certain
products such as cars and washing machines. Also there was already too much investment in
industry, but not enough investment in wages. Factories started to produce more than people could
afford to buy. After the stock market crash and the fears of further economic woes, individuals from
all classes stopped purchasing items. This then led to a reduction in the number of items produced
and thus a reduction in the workforce. As people

Great Depression Causes And Effects Essay
The Great Depression originated in the US, lasting from 1929 to 1939. The most probable cause
for the depression was the Stock Market Crash of 1929, which wiped out millions of investers. Due
to millionaires pouring their own savings into stocks, the markets reached their peak. To add to this,
the wages were low, consumer debt increased, banks had so many loans that they couldn't get rid of
them, and factory production slowed, while stocks rose and rose. It came to the point where
investors began selling shares in groups and most became worthless. Consumers were now less
confident in businesses and banks. Suddenly, the markets crashed and 13 million people became
unemployed, many lost their savings account, homes, and organizations were made...show more
content...
This didn't last long as Germany's attacks at sea, causing hundreds of Americans to die, caused the
US to join the war. Although WWI was one of the most gruesome wars, there still came positive
outcomes. WWI began by the assasination of Archduke Franz Ferdinand fromAustria Hungary,
by Serbia. WWI changed the face of America forever. While men left for war, women took their
jobs, the first time they've left their domestic work and have worked in a factory ( a man's job ).
They also had the opportunity to go over seas and help the wounded . Due to needing vasts amount
of supplies for war, production and effiency in industries grew, technology advanced, and the
economy boomed. Industries began to receive an increase in profits, causing inflations to become
high, increasing the cost of living by nearly 15% more than average. The Great Migration of
300,000–500,000 of African Americans from the South of the US to the North , caused a massive
influx of people into cities, leading to squalid conditions, even more so, when the soldiers came back
from the war, it created even more intolerance towards immigrants and African

What Are The Causes Of The Great Depression
In the 1930's the great depression started when the stock market stopped a lot of people soon
became in debt and also jobless, later the dust bowl caused a lot of people from the midwest and
migrate to california to find jobs.The Dust bowl destroyed all the crops in the midwest and also
took all the great soil out of land, and killing the animals because of the dust in the air, making the
land in the midwest look like a desert. Farmers were devastated so the farmers who had no land
and no crops had to migrate to California to find jobs to get money for their families to live. The
great depression and the dust bowl were both big problems in america, the great depression caused
people to lose jobs and the dust bowl caused farmers to lose their farms and those were the causes
that people had to migrate to california. In Seattle people had to live in shacks that were made by
old boxes and boards because of the great depression people didn't have money pay for their homes
and for food so all people were also hungry. In a part of Seattle which was named "Hooverville"
named after the president that tried to fix the problem also who was blamed for the great depression.
...show more content...
The migrant farmers which were called okies were looked upon with scorn by the farmers from
California and also by the native people. 1929 Dairy farmers had sold dairy products and also had
a argument over the low cost of milk and bread. Farmers would work hard on making dairy
products and grow corn and oats, but the farmers didn't earn enough money because the price of the
products were so

Essay On The Causes Of The Great Depression
There are numerous causes for the Great Depression, but with intensive research we have narrowed
it down to a few specific origins. Some of the contributing factors to the Great Depression included
the stock market crash, banks failing, poor education about money, agricultural problems, and
President Hoover having a "do little" attitude. Almost overnight the United States went from a
bustling "Roaring Twenties" to a dreary depression. The Stock Crash of 1929 was the biggest event
to kick off the depression. The money not only disappeared overnight, but the people lost their
money and became poor. Many Americans wanted to "get rich quick" and put their money into
businesses or into money schemes. When the stock market crashed their money was gone. The
people lost all their money over night and had no money to put into the banks. Because of this,
both the banks and the people suffered greatly. Americans became broke and lost their jobs
because of no money circulating. The trust with banks became very low and "said" money was not
actually there for use. Not knowing how to use credit and the long term effects also took money
away from banks. Years prior...show more content...
Many lost money and therefore the trade of food went down also. Since no one had money to put
back into the economy, everyone became broke. For any economy to be successful, it at least needs
the people living in the country to spend some of their money to circle back into the country. Since
people weren't spending money during this time, businesses started closing. This resulted in an
unbelieveable amount of unemployment. In 1933 unemployment rose from 3.2 percent to 25
percent. Since no one had money to spend, trade of many other products also declined and stopped
bringing money to the U.S. Europe was one major trading partner that started to pull

Primary Cause Of The Great Depression
Great Depression Lecture Questions.
1. What was the primary cause of the Great Depression?
The Great Depression was caused by a few factors but the major reason behind it was the financial
markets then was not based on realities of the economy. The model used did not show any
implications of correlation of company health to the price of stock.
The speculation of the market trend was also unregulated since most stocks were purchased on
margin and corruption was also at highest since the market was rigged by Wall Street officials.
Another major cause behind this was the fact that commercial banks and institutions had invested
their customer savings in the stock market which resulted in millions of people losing their life's
savings.
2....show more content...
This also compelled the US to exercise non–entanglement in international politics
As a result, there was The Japanese invasion of Manchuria and also, the push of gaining total control
over expanses of Northeast China in 1931.Resulting from this, United States expressed concern over
the aggressive action without committing itself to any direct involvement or intervention. There
were also other conflicts arising from this such as the Italian invasion of Ethiopia and the Spanish
Civil War.
2. Why did the United States assist Great Britain and the Soviet Union in their struggle against the
Axis powers before the attack on Pearl Harbor?
The Alliance between Japan, Germany, and Italy gripped Europe with fear Roosevelt's back wanted
US aid providing a response toward Hitler and Mussolini and also in 1936, Germany rearmed the
Rhineland– a 50–kilometer strip of land, this would make it easier for the French to invade
Germany. The US was primarily concerned with colonies of France and the Netherlands, which were
left unprotected by the War in Europe.

The Cause of the Great Depression Essay
The Cause of the Great Depression The economic expansion of the 1920's, with its increased
production of goods and high profits, culminated in immense consumer speculation that collapsed
with disastrous results in 1929 causing America's Great Depression. There were a number or
contributing factors to the depression, with the largest and most important one being a general loss
of confidence in the American economy. The reason it escalated was a general misunderstanding of
recessions by American policymakers of the time.
The U.S. economy was booming in the 1920's. Stocks prices soared, as they were bought on margin
for as little as 10% down. Market speculation is cyclical–that is, if one stock appears profitable, you
buy it,...show more content...
Many people lost as much as ten times their initial investment, which shook consumer confidence. In
an effort to cover their margins, people rushed the banks in masses, demanding their money. Soon,
banks began to run out of cash and went bust.
With the economy falling in shambles and companies defaulting on loans, nearly all private and
corporate investment ceased. Companies couldn't afford to expand, and in fact, many had to
consolidate in order to cover the margins on their loans. This meant postponing hiring and laying
workers off, which caused unemployment to skyrocket. With people now willing to work for less
money, wages lessened too. At the same time prices rose in an attempt by companies to make some
amount of profit off the goods.
Because the governments' prevailing economic theory was based on laissez–faire economics, the
government believed that recessions were self–correcting. Eventually unemployment and inflation
stopped declining, but not before the U.S. lost 1/3 of it's output and 25% of the workforce was
unemployed.
In the end, it was World War II that brought us out of the Great Depression. With war at hand, the
government began pumping massive amounts of money into the economy. Production and inflation
increased. More jobs were available and wages rose. At the

Causes Of The Great Depression Essay
Between the late 1890's, after the panic of 1893, and the late 1920's, the American people led
good lives in which most prospered. In the 1920's the problems that led to the Great Depression
were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull
market is a stock market that is based on speculation. Speculation was a system of borrowing
money to buy stocks and selling for a profit. Speculation only worked if the stock market was on the
rise though. To this day people who have not been properly educated about the GreatDepression
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...show more content...
The national income rose from $74.3 billion to $89 billion (Gusmorino, Main Causes of the Great
Depression). The whole American population did not live through the benefits of the "Coolidge
Prosperity." For example McElvaine, in his research on the Great Depression, stated, "in 1929 the
top 0.1% of the population had an income equivalent to the bottom 42% of the population,"
(McElvaine, Causes of Depression). That same top 0.1% of the population in 1929 had 34% of all
the savings, while 80% of the population had no savings at all. A good example of this
maldistribution of wealth can be seen with Henry Ford. In 1929, Ford reported an income of
fourteen million dollars, while the average income of the American people was seven hundred and
fifty dollars annually (McElvaine, Causes of Depression). If one were to calculate these numbers by
present daily standards, with the average income at eighteen thousand dollars, Henry Ford would be
making an astonishing three hundred and forty five million dollars. However, one should be
reminded that Ford was not the only man in America making this amount of money, there were
many people just like Ford around the Nation. Comparing the 1920's to today, one could say that
such businessmen are like the Internet CEO's today. With such a growing gap in the income of the
people, it was without surprise that such a catastrophic event could occur. The Federal

Great Depression Cause And Effect Essay
The major cause for the Great Depression was the fact that Americans began to buy goods on credit
and that some bought stocks on margin. During the Roaring Twenties, various new products, such as
vacuum cleaners, electric irons, fans, cars, radios, and others, began to be manufactured and
introduced into the market. By 1923, there were over 500 radio stations that existed in the United
States and there were over twelve million radios that were in American homes. Since these new
products were expensive, a large portion of Americans bought them on installment plans or lines of
credit. After years of overspending, these debts were unable to be paid back. This led to a crisis,
since the banks that issued the loans took the money from the savings accounts of customers at the
bank. Thus, their money was lost. When patrons of the bank were unable to recover their money, it
caused a panic. This led to a rift between individuals...show more content...
This means that people took out loans to invest in the stock market and when those stocks did not
perform, they were unable to pay back the debts. A major factor in this type of underperformance
was the way that the stock market was overvalued. Between 1925 and 1929, the value of the New
York Stock Exchange rose from 27 billion dollars to 87 billion dollars. After it was apparent that the
prices were heavily over inflated, it caused the value of the market to drop. Moreover, the interest on
the loans for margin investing were high, in some cases as high as 20% which also made them
difficult to pay back. As mentioned before with installment plans, the banks took money out of the
savings accounts of those who put money in the bank to issue the loans for these investments and
they were unable to come up with the funds from the savings accounts. This also contributed to the
rift between the banks and those who put money into the

Causes of the Great Depression Throughout the 1920's, new industries and new methods of
production led to prosperity in America. America was able to use its great supply of raw materials
to produce steel, chemicals, glass, and machinery that became the foundation of an enormous boom
in consumer goods (Samuelson, 2). Many US citizens invested on the stock market, speculating to
make a quick profit. This great prosperity ended in October 1929. People began to fear that the
boom was going to end, the stock market crashed, the economy collapsed and the United States
entered a long depression. The Great Depression of the thirties remains the most important economic
event in American history. It caused enormous hardship for tens of...show more content...
On average, people's wages stayed the same even as prices for these goods soared. The factories
and farms still continued to produce at the same rate, but demand for their products was
decreasing. As a result, more and more workers became unemployed, until 25% of the population
was out of work. The American Federation of Labor fell from 5.1 million in 1920 to 3.4 million
in 1929 (Temin, 68). All of these groups, being poorer than the rest of the country, could not afford
to participate in the boom of the 1920's. There was a major unequal distribution of income that led
to the richest 1% of Americans owning approximately 40% of the country's wealth (Matthews, 2).
The country entered the 1920's with Warren G. Harding as president. Harding was a Republican as
well as a laissez–faire capitalist who advocated policies which reduced taxes and regulation,
allowed monopolies to form, and allowed the inequality of wealth and income to reach record
levels (Tanner, 3). Harding died in 1923 and Calvin Coolidge continued Harding's policies of
minimal government intervention in the economy and in business. Under Coolidge, the stock
market began its "artificial" five year rise, the top tax rate was lowered to 25%, and the Supreme
Court made an important ruling which further limited government control over monopolies (Tanner,
8). In the 1920's more people invested in the stock market than ever before.

Causes Of The Great Depression Essay

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Causes Of The Great Depression Essay