University:
Arizona State University
Course:
HST 200 | Historical Themes
Academic year:

2024
Views:

359

Pages:

3
Author:

Thuyoul US

Examining the Great Depression Causes and Consequences Overview The Great Depression, one of the biggest economic downturns in modern history, lasted from 1929 to the late 1930s. This global recession was caused by a number of events and had a profound impact on businesses and communities across the globe. According to this essay, speculative investment practices, a financial crisis, and sharp declines in consumer spending were the main causes of the Great Depression, which resulted in severe economic misery and social unrest. Practices of Speculative Investments The 1920s saw a great deal of stock market speculation, which was one of the main causes of the Great Depression. Investors used strategies such as buying on margin, in which they borrowed funds to buy stocks with the intention of selling them for a profit. This approach raised stock prices without any supporting evidence from real company profits. For example, speculative frenzy propelled the New York Stock Exchange to an all-time high in 1929. But on October 29, 1929, popularly referred to as "Black Tuesday," the market fell, resulting in enormous losses that not only destroyed individual fortunes but also rendered many businesses worthless, severely eroding trust in the US economy. Crisis in Banking The economic downturn was made worse by the banking crisis that followed the stock market fall. A large number of banks had made unsustainable loan extensions or significant stock market investments. Bank failures became prevalent as stock values plunged; between 1930 and 1933, almost 9,000 banks closed. Deflation was caused by the widespread loss of savings resulting from the failure of these financial institutions, which also further decreased the money supply. When the Bank of the United States failed in 1930, for instance, panic ensued and depositors hurried to remove their money, thereby stopping economic activity and plunging the country into a deeper recession. Decrease in Consumer Expenditure Fear and uncertainty about the economy caused consumer spending to plunge, which exacerbated the crisis. People started making fewer purchases as their confidence in their financial stability declined. This had an effect on businesses, which resulted in a vicious cycle of layoffs and decreased output. One prominent example is the auto sector, where declining sales forced major output reductions from firms like Ford and General Motors. According to estimates, unemployment skyrocketed to almost 25% by 1933, severely impacting common Americans and causing widespread desperation and poverty across the country. In summary In conclusion, the Great Depression was a complex phenomenon that was mostly brought on by speculative stock market investing, a disastrous banking crisis, and sharp declines in consumer expenditure. These factors combined to produce a depressing economic climate that affected both the US and the rest of the world for a long time. Knowing these details is crucial for historical background, but it's also a crucial lesson on the value of stable economic growth and responsible financial behavior. Citations B. S. Bernanke (2000). Great Depression essays. Princeton University Press In 1963, Friedman, M., and Schwartz, A. J. United States Monetary History, 1867–1960. Princeton University Press Romer (1990) C. D. The Great Depressive Period. Economic Perspectives Journal, 4(1), 21–46