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Depression and a “Great” Depression have two totally different definitions. Hence it is all in the name. Well a great depression not only affects on country but many countries. Many economic historians say that it was not Just caused by one particular thing, but many things. The depression originated in the U. S. after the fall in stock prices that began in October, 29, 1929-1941 known as “Black Tuesday’. A lot of people started to invest in stocks, during the 1920s, when everything was going great (DocJ)! Everyone was making profit, sharing profits, basically gambling with their stocks (DocF).
However, stocks can go up simply because buyers believed they will be able to sell the stock for more next week or next month. Most of the time investors were eager to invest in the stock so some of them bought there’s on credit. That is the investor pays a certain percent and the broker gets the rest of the money from the bank (DocG). But at the end everyone lost. Why because of speculation, the stock market crashed. The stock market was trigged by British who raised their interest rates in an effort to bring back capital lured abroad by American investments (DocD).
Foreign investors and wary domestic-speculators began to dump their insecurities” and orgy of selling followed. People began to panic and sell. Two months after the crash-stock holders had lost 40 million paper values or more than the total cost of war to the U. S. That was a major cause of the Great depression because a lot of people lost money because of the crash. Before “foreign investors and domestic speculators began to dump their insecurities and started selling. ” Farmers were very frustrated because the wheat shot up to 3 dollars a bushel.
But peace bought an end to government guaranteed high prices and to massive purchase by other nations, as foreign production eentered the stream of world commerce. Now gasoline engine tractors helped farmers produce more, that meant more price dampening surpluses. Depression swept through agriculture districts in 1920 when one farm out of four was sold for debt or taxes. Farmers pushed McNairy-Haugen bill on 1924-1928 to keep prices high b authorizing the government to buy up surpluses and sell them abroad. Government losses were to be made up by special taxes on farmers.
Congress passed the bill twice but Coolidge vetoed it twice. Farm prices stayed down. The farm board set up the Grain Stabilization and the Cotton Stabilization Corporation to boost rice by buying up surpluses. But the two agencies suffocated by an enormous production from farms, as wheat dropped to 57cents a bushel and cotton to Scents a pound that is equal to overproduction (DocN). So farmers felt that a tariff would help them financially. Hoover promised to call congress into special session to consider agricultural belief and, specifically, to bring about “limited” changes in the tariff.
It was known as the Hawley Smoot Tariff Act, set up to help the farmers. But it turned out to be the highest protective tariff in the nation! It was raised to nearly 60 percent! But let us look back to the international depts. In the 1920 America lend foreigners about 10billion dollars. Of course Americans wanted to get paid. But the French and British told America that they had to enter the war. They also basically asked them how are supposed to pay you back if you set up a postwar tariff, that made it impossible to sell goods and pay back their debt (DocO).
So basically the Hawley Smoot Tariff Act plunged both America and other nations deeper into the terrible depression that had begun. It also increase international financial chaos and forced the U. S. into the bag of economic isolationism. So if no countries import or export, where is the money coming from, no where! Depression in America was given a further downward push by a chain reaction financial collapse in Europe, following the failure in 1931 ofa prominent Vienna banking house. So after one bank fell another fell. Throughout the 1930s over 9000 banks failed.
Bank deposits were uninsured and thus as banks failed people simply list their savings. Surviving banks, unaware of the economic situation and concerned for their own survival stopped being as willing to create new loans. This exacerbated the situation leading less and less expenditures. Business cycle works hand in hand with supply and demand. It is a cycle starting at expansion, peak, contraction, trough, and expansion. Starting at trough is referring to the Great Depression. That is when people are all unemployed. These unemployed workers are broke and only buying the essential.
Trough will go away when prices get so low that even the poor begin to buy. But most of the people bought on installment (DocH). People got stuffed with stuff. They got stuck with cars, furniture, house, etc. whatever they bought on installment, the buying slacked off because everyone already bought what they needed in the 1920s (DocM). Workers got laid off, fired workers could not buy, and the economy went into a slider refers to contraction. During the Great Depression our gross national production was -40percent (DocA).
Too much money was going into the hands of a few wealthy people, who in turn invested in factories and other agencies of production. Not enough was going into salaries and wages where revitalizing purchasing power could be more quickly felt. New laborsaving machines also added its burden to the abnormal unemployment of the thread bare thirties. By the end of 1930 more than 4 million workers in the U. S. were Jobless, which is about 1 1. percent including nonfarm employees and farmers (DocE). No Jobs no buying, the business cycle!
Hungry and despairing workers pounded pavements in search of none existing jobs. Where employees were not discharged wages and salaries were often slashed. Lines where formed, soup kitchens, dispensed food, and apple sellers stood shivering on street corners trying to peddle their wares for five cents. Families felt the stress as jobless fathers nursed their guilt and shame and not being able to provide for their household (Docl). People lived in “Homerville’s” paper shanty towns. That led to lack f food, water, shelter, slums, and sometimes killing.
Usually families income was about 2000 (DOCK) that was only when Roosevelt set up the “New Deal”, he set up a lot of acts so the economy can go back up, but with that little wage it did not. So there were a lot of causes to the Great Depression but I think the main cause to it was the tariff. We could of worked it out better with the tariff maybe would not went so high. Maybe our allies could of paid us and the whole cycle would of went faster. You Just got to make conditions before you let someone borrow money or else you will see it late or never see it!