The Wall Street: A Major Cause Of The Great Depression

The Great depression

Introduction:

The great depression of 1930 was one the most disastrous event in the economic history. It started from the United States and then spread to the other countries. It lasted for 10 years and brought immense problems for the people and the government of that time. The great depression of 1930 is studied as an example of how far a country’s economy can fall. The recovery of many countries, from the great depression started just before the World War 2. There are many reasons that caused the great depression few of them are discussed below.

Reasons:

1. Credit buying: Before the great depression started the American economy was in a very stable and consistent position. People were buying many consumer goods including

Agricultural sector: The agricultural sector was already in a poor state before the great depression started. The farmers expanded their farms and improved their technology which increased their cost of production. However, there was not much demand for the agricultural products at that time. So there was overproduction of the goods which didn’t benefit the economy. So the poor condition of the agriculture sector also leads to the instability of the economy.

3. Crash of the Wall Street: A major reason of the great depression was the crash of the stock market. The stock market was making huge profits and people not only the rich class but the middle class also started investing their money in the stock market. People were taking loans from the bank and were investing them in the stock market. On Tuesday 29 October 1929 however, the value of shares fell and the market crashed. Most of the people lost their money and went into debts.

4. Failure of banks: The American banks at that time were small institution and they were relying on their own resources. When the stock market crashed many depositors went to the banks to take their money but the banks had fewer reserves to give to the depositors so they had to sell their asset. Moreover, the banks stopped giving more credits which ultimately led to low circulation of money in the economy. This damaged the economy

Poor policies of government: After World War 1 Germany and other countries had to pay war reparations for which they had borrowed loan from the U.S.A. When the stock market crashed Herbert Hoover immediately called for the repayment of loans from other countries. Countries who were recovering from the war destruction found it difficult to repay the loans and this destroyed their economy as well. As a result, the great depression spread all over the world.

Consequences:

1. High Unemployment: The great depression caused high unemployment in the economy. The unemployment rate in America rose to 25% during great depression and in other countries the rate was up to 33%.

2. Increase in suicide rate: During depression and the market crash it is said that many people committed suicide as they lost everything they had. On the day of market crash it said that more than 10 brokers committed suicide.

3. People lost faith in government: After the market crash people didn’t trust the government. Many protest and strikes were carried out against the government.

4. Increase in crime rate: Due to high level of unemployment, the rate of crime increased. The people had to do something for survival and only option left to them was to indulge themselves in criminal activities.

5. Migration: During the period of depression, many people left their belongings and migrated to other places. Many farmers had to leave their farms and settled in other