Causes of the Great Depression Essays

Submitted By allikaufman2
Words: 966
Pages: 4

The Great Depression was the worst economic time in the United States because it affected the lives of millions of Americans. It was caused by many different things. It put many workers out of jobs and drastically increased the number of homeless people. Both banks and businesses failed. There were many ideas on how to fix the Great Depression, and liberals and conservatives and different ways of handling it. There were many different causes of the Great Depression. One of the biggest causes was the Stock Market Crash. Speculation eventually led to the market falling 12% because so many people were buying stocks to sell them for quick money. This made their price go up, making them cost more than they were actually worth, and soon no one wanted to buy them. When the stock market crashed , people rushed to the banks to get their money out. When a person puts money into a bank, most of it is loaned out to other people, and only a small percentage is kept there. So when people when to withdraw their savings they waited in long lines and only a lucky few got their money before the banks ran out. Overproduction and underconsumption also helped lead to the Great Depression. This is when the economy is producing more goods than people are buying. Companies then had to continue to drop their prices but people either had everything they wanted or couldn’t afford to buy the goods being sold. Companies failed or had to lay-off workers, increasing unemployment and further decreasing the amount of good being bought and money being spent. Over time, the gap in wealth widened. The middle class started using loans to buy more things. This money then went to wealthy business owners, and the middle class became more in debt. The government also played an important part in causing the Great Depression. Congress passed the Hawley-Smoot Tariff Act, increasing tariffs. They thought this would help protect American businesses but instead it caused a trade war. European countries increased their tariffs, stopping all trade and making it harder for companies to export their excess goods. The Fed increased the discount rate as well, making borrowing money a lot harder for businesses and people. As borrowing money became harder businesses continues to fail and more people lost jobs. After the stock market crash the economy was in very bad shape. As banks went bankrupt, many people lost all of their savings. Banks lent money to stockbrokers, to lend to individual investors to buy stock. When the stock market crashed loans couldn’t be paid back, and many Americans were in debt. As banks and businesses went under, many people lost their jobs. In 1929 before the crash, only 3.1% of Americans were unemployed. By 1933, 25% were out of jobs, a total of 13 million people. Without jobs, these people couldn’t pay their mortgage or rent so they were evicted from their homes. Underconsumption led to farmers having excess crops. They had to lower their prices to sell them, decreasing their property value. Some even lost their land. People faced many hardships during the Depression. Many people lost their homes so Hoovervilles were built all over cities. A loss of work led to an increase in hunger. Many people couldn’t afford food so they picked through trash, begged, or stole food. To help the need soup kitchens sprung up in cities. For money, people got creative. Some sold newspapers or apples, and other loosened drawers or even shined shoes. Many teens left home to find work because their families couldn’t afford to support them. Although there was a decrease in divorce rates, there was an increase in desertion rates. Men left their homes to live on…