Economic Causes Of The Great Depression

The 1920’s in America was an incredibly prosperous time for the nation. America saw drastic economic, political, and cultural change in an age known as “The roaring twenties”. Rapid industrial growth and production, matched by increased consumer demand saw the nation's total wealth double in total from 1920-1929. By 1930, this prosperity had run out and severe economic problems struck the nation. The economy plummeted and everyone felt the effects of it .The severe downfall of the American economy in the 1930’s known as the Great Depression was the result of speculation and installment buying, income maldistribution, and overproduction throughout America. After the roaring 20’s, speculation and installment buying drastically increased

The unequal distribution of income in America in the 1920’s led to the increased wealth of the highest percent in America, and the increased poorness of the lowest percent. In the time between 1920 and 1929, the top 1% rose in income by 75%, while the rest of America only grew a total 9% as a whole. After 1929, unemployment rates were at an incredible high. Between 1930 and 1940, the rate ranged from between 21.3% to 37.6%. (Document 4) In 1929, the percent of American families earring $5,000 or more was only 8%. The other 92% of all of America was earning less than 5 thousand dollars. (Document 9). In 1929, a $2,000 income was “considered the minimum necessary for meeting basic needs of an average US family.” (Document 9). $2,000 marked the poverty line in 1929, and yet 60% of Americans made under this amount. This illustrates the immense unequal distribution of money throughout Americans in that only 40% could meet the bare minimum necessary to live. More than the majority of America was living in poverty, causing unemployment and failure to properly distribute money throughout the nation. This horrible situation plummeted the economy and Americans as a whole as well as individually, which makes I.t a main cause of The Great

Overproduction in America became a big problem due to technological and industrial advancements which left producers with too much supply, and not enough demand from consumers. Due to advancements in technology, production was at an all one high in America. Farmers were able to use new techniques, but began producing product too fast for it to be purchased. This overproduction left producers with too much product and a need to offload, so prices were driven down. As prices were driven down to the lowest point to create sales, this caused problems for the economy. It was extremely low. If they couldn’t create sales, they were forced to shut down close business. Factories closed and workers were laid off, meaning no money was coming into workers or big businesses. Unemployment percentages were at an extreme high and this failure to regulate money throughout the economy drove down the economy. The overproduction which initially started this downwards spiral effect can be recognized as a very important cause to the start of The Great Depression in