Research Paper: The Causes of Great Depression
The Great Depression began in August 1929 and continued to March 1933. It was the worst economic depression of all time, it effected the entire world and plunged us into some of the worst years in our history. It was a dark time for many. The causes of the Great Depression are still hazy however, these are the core causes as to why it happened. The Stock Market crash of 1929 was the first major catastrophe that sent the economy into a tailspin towards the ground. Billions of dollars were lost as a result. Bank Failures was another major reason, without the banks people would lose all their savings because the banks could not pay them back. The drought in the Midwest caused many farmers to lose their crops. This caused mass food shortages as well as many farmers losing their farms because they could not pay the banks. The Great Depression was a major catastrophe that stemmed from many failures of many different institutions and government bodies, the stock market crash of 1929 blew off the bomb, the bank failures then blew up from the chain reaction started by the crash, the drought in the Midwest caused mass unemployment and food shortages, when all that came together it caused one of the worst consequences in US History, The Great Depression.
October 29, 1929 was just like any Tuesday in America when the market suddenly crashed. Stockholders immediately started selling off all the shares they had, flooding the market. This made them worthless as there was so many in circulation. This day came to be known as Black Tuesday. The market crashed because of a few reasons. One was that the public was too overconfident of the market, this caused stock prices to inflate above what they should have been worth. The second reason was that people were buying stock with credit from banks. The third reason was that the banks raised the interest rate which made more people eager to borrow credit for stocks. When the crash happened however, they sold all their stock at the same time to get their money out before it was gone. This caused the market to do a tailspin into the ground. It made shares worthless, and billions of dollars were lost in turn. With all that money lost companies also lost a lot of money. That caused mass layoffs as companies could nott afford to pay their workers their wages since they did not have much money. “By its height in 1933, unemployment had risen from 3% to 25% of the nation’s workforce” (Amadeo, 1). Companies maintained a limited workforce as they could not afford to pay wages. This occurred all over the country as many lost their jobs and became unable to financially sustain themselves. (“The Great Depression,” 1) (History.com Editors,1)
The bank failures were a result of the Stock Market Crash of 1929. After the crash, people panicked they wanted their money immediately. They went to banks and took all their money out. The problem was that the banks did not have enough money to pay everyone's savings out to them. The banks had no money left leaving them bankrupt. This caused millions of Americans to lose their life savings over a few hours. The other reason is that the banks invested people's savings into the stock market without informing them which they lost when the crash hit. They gambled with other people's money and lost it all. After this no American trusted the banks. Even after the depression many did not put their money in banks but saved it in cash instead. ‘“I can assure you that it is safer to keep your money in a reopened bank than under the mattress.”
– President Franklin Roosevelt’ (Greene, 1). It would take much coercing by the government and the president to get some Americans to give the banks another chance. The president Franklin Delano Roosevelt set up what he called fireside chats to ease the American populations minds and get them to believe that it was going to get better. This might have been the grossest incompetence of the depression. (Engemann, 1) (Great Depression Bank Crisis, 1)
The Great Depression Drought started in the 1930s. However, first we must examine before the droughts as well. In the 20s farming equipment was expensive while crop prices were extremely low as there was a surplus of crops in the United States. They stopped their soil conservation practices which caused the soil to be susceptible to erosion as it turned to dust. In the 30s the Dust Bowl began, because they stopped taking care of the soil it became dry and with a drought it was like dust. When the winds picked up it became airborne and caused dust storms. Crops were destroyed and inedible. It was hard to grow anything due to the bad soil. Farmers could not make money from crops as they could not grow any. This caused them to default on their bank loans for the expensive equipment and most would end up losing their farms. This also caused a food shortage which added to the woes of the American people at this time. Most were unemployed and now there was no food either. This helped perpetuate the suffering of the American people and caused the Great Depression to drag on even longer.
The Great Depression was one of the darkest times in US history. The Stock Market Crash of 1929 was the start, the Bank Crisis was the lowest point, and the Dust Bowl was a kick when the people were down. The woes of the people were immense. They fought through it and on the other side was an even stronger people. People that lived through some of the worst, that were hardened by it. It caused a stronger economy and a booming industry as the people had learned from their mistakes. They would never let another catastrophe like this happen again. The government also implemented new regulations and guidelines for the economy and banks to make sure that nothing like the Great Depression could ever occur again.