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The Two Primary Causes Of The Great Depression

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On October 29, 1929, the long and severe economic recession began and became what is known as the Great Depression. The Great Depression had begun as a nationwide problem but soon became a worldwide issue. In 1929, the stock market crashed and sent America into an economic slump. Banks failed nationwide and unemployment rose as high as 25%. There are two primary reasons for the Great Depression: speculation and buying on margin. The Great Depression brought a lot of hardships to the families all across America. Meanwhile, President Roosevelt is doing all he can to help the recession by engaging his plan for the New Deal. The time of the Great Depression was given its name for very obvious reasons. America was genuinely worried for their future. …show more content…

The crash of the stock market only made matters worse for the economy and sent America into its worst and longest lasting recession. Speculation was part of the reason for the economy’s downfall. “Over a million ordinary people...lost their life savings in stocks but lost their livelihoods in the speculation frenzy” (Gerdes). Speculation was used by many people to pay for their investments in the stock market. This was a terrible idea. Because so many people purchased on borrowed money debt grew immensely in America and people didn’t have the money to pay it off. Buying on margin became an issue as well, during this time. “In the 1920s, the buyer only had to put down 10 to 20 percent of his own money and thus borrowed 80 to 90 percent of the cost in stock”(The Stock Market Crash of 1929). Because so many people purchased stock on borrowed money, after the economy tanked, a majority of the people were in grave debt to the banks. Speculation and buying on margin were the source of the nationwide problem, the Great

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Leuchtenberg sad, “There was no single cause of the crash and ensuing depression,” [Doc2]. Many things as stated earlier contributed to the crash, such as overexpansion of credit, goods, industries and rising rates of unemployment. Many Americans saw the Stock Market as an easy way to create wealth by buying stocks cheap, usually at a margin, and selling for a higher price, hopeful to profit. Buying on margin was the act of paying some money on a stock, but loaning the rest from a bank who expected would be paid back when profit was made. Stocks became more expensive to the point where nobody wanted to buy them because of their extreme price.

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The American economy suffered this vast plunge because speculation in the stock market, maldistribution of income, and overproduction of goods. For the duration of this time period, the purchasing of stocks became very popular,

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The purchase of a stock with hopes that the value will increase but not actually knowing it will is known as speculation, this combined with the heavy use of installment buying caused many people to fall into extreme debt, creating an unstable economy and leading to the Great Depression. Since it was no longer seen as shameful to be in debt, the American people were now taking advantage of credit and installment buying (Document 6). People wanted to maintain this new standard of living and did so by amassing large amounts of debt through this buy now, pay later system. This acceptable economic prices, combined with the speculative purchase of stocks led to a detrimental economic downfall. The prices of stock were driven up based on this speculation instead of any increase in the profits of the business (Document 5).

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The exciting and prosperous decade of the 1920s suddenly ended when the world faced a severe economic crisis known as the Great Depression. Most men were unaware of the upcoming crash of the economy and were left penniless. What led up to this catastrophe that not only affected our country but the world, globally? After the 1920’s many people began thinking they could get rich easily by buying stocks. This was the beginning of many unexpected problems such as stock market speculation, the failure of many banks, and the problem of overproduction and underconsumption.

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Before the Stock Market crash of 1929, America went through a decade of prosperity and social change known as the Roaring Twenties. New fads and numerous inventions emerged throughout our country. Many people bought on credit and as a result, our economy flourished. However, many Americans failed to realize this would be one of the underlying causes leading to the Great Depression. For instance, “Most people bought, but many couldn’t afford to pay the full price all at once.

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While trying to make a quick and easy profit, Americans ignored the risks and spent more than they had with installment buying and speculation, leading them to go into debt, cut their spending and send the economy down the drain. Speculation was a way Americans tried to make a quick and easy profit. Due to little restrictions during the 1920s, Americans could buy stocks on the margin or use borrowed money. Harry J. Caraman and Harold C. Syrett in their book A History of the American People state, “the exchange became a betting ring where people gambled on stocked in much the same fashion that gamblers wagered on roulette or horse races” (Document 5). The people were throwing their money left and right, not caring about the risks involved.

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America had experienced other depressions or “panics,” but none were like the Great Depression. The Great Depression began on October 29, 1929, Black Tuesday, with the stock market crashing. Most people believe that the cause of the Great Depression was the stock market crashing. Although that is what triggered the Great Depression there were many underlying causes that lead up to the stock market crashing. Some of the underlying causes include under-consumption/over-production, uneven distribution of wealth, loose banking and corporate regulations, tariffs policies, and the stock market.

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The Great Depression was a long-lasting economic crisis in the global economy which started in the U.S. in 1929 and 1939, in the western developed world. The Great Depression started right away after the crash of the stock market towards the end of the year 1929. The Great Depression was the most devastating and damaging economic event to affect the global economy since the beginning of the twentieth century. This caused extreme decline in industrial output and a rise in the level on unemployment due to failing companies laying off their workers.

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Today, there are several different theories as to what the causes of the Great Depression are. There is clearly more than one cause of this devastating event in American history. The Great Depression occurred during the years 1929 through 1939, approximately ten years. During these awful ten years two presidents had the opportunity to try and reroute the American economy. Both of these presidents, Hoover and Roosevelt, had polar opposite approaches to the situation.

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And to cover up the expense the banks have to get the money from the interests they get on loans. The banks also gave loans to the stock market brokers and as the stock markets failed the bank couldn’t get the moneys back as a result they failed. And this bank failure along the stock market crash caused a great harm to the Us economy. During the mid 1920s the stock market went through

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The Stock Market Crash of 1929 was not so much a cause of the Great depression, but the event that kicked it off. The Great Depression started with the Stock Market crash of 1929, and was caused by many problems politically, economically, and socially. The social trends and attitudes of the late 1920s led to two important problems that turned out to be a major cause of the Great Depression. Over Speculation was a big problem because of people 's social attitudes of the time.

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