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What Caused The Great Depression Essay

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The main event that almost everyone remembers from their history class is usually the Great Depression, which was a period of economic downfall for the United States, but how did it begin? There were many factors that led to the Great Depression including, but not limited to, the stock market crash of 1929, the panic of 1930, as well as the increase in tariffs on imported and exported goods. These events ultimately led the United States to a major depression that took around 16 years to overcome. The first main cause of the Great Depression was the stock market crash of 1929. This was when a stock market panic occurred and caused around $10 billion to be lost in market value. Before the stock market crashed, many people were introduced to …show more content…

For one, the government could have taken a better look at the banking system used when credit was in play. As mentioned by the Federal Reserve History, banks had ‘floating’ checks that were counted in two bank reserves, one where it was deposited, and one where it was drawn, so it was believed that the cash was in both banks. In truth though, “the cash only resided in one bank.” (Richardson, 3) Overall, it meant that there was less money available in reserves. If the government had paid more attention at the time, this problem could have been avoided. Along with that, regulating the stock market and who could and couldn’t use credit could have also prevented the Great Depression. During that time, everyone could use credit whether or not they could pay the loans back. If it had been managed so only people who were financially stable and could pay back the loans could use credit, things would have gone differently. To add, more jobs should have been created to counteract the unemployment rate. Finally, the government should have reduced tariffs as it was evident that the Smoot-Hawley Act was not beneficial to the US during that time. Although these actions could have prevented the Great Depression, I do not think I would change the course of events. This is because, through this depression, the US was able to learn and grow from their mistakes and use these lessons in the future to prevent it from happening

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The problem was that many people that bought stock bought their shares on a type of credit in which they paid part of the amount required and planned on paying the rest after they sold their share. When the stock market crashed, shares were worth nothing and the investors could not afford to pay the remaining balance of the original purchase price. Moreover it was common for people to borrow money from banks to buy stock so it became a problem for the banks when the population could not pay back their

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This tragic event sent Wall Street into a complete frenzy and took out millions of investors. Over the next few years, consumer investment and spending decreased. This caused sharp declines in manufacturing production and rising levels of unemployment. By 1933, 13 plus million Americans were unemployed and nearly half of the country’s banks failed (Coker, 2005). Thanks to the reform and relief measures placed by President Franklin D. Roosevelt helped diminish the most horrible effects of the Great Depression.

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The stock market began to crash on October 24, 1929, also known as “Black Thursday.” Stock exchanges were created to address the capital issue. A stock market was where the owner of a business would sell his ownership in shares. Shareholders would put money into a business and when the business received a profit shareholders would get paid.

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Speculation and installment buying involved the decisions Americans made that caused the economy to plummet. In 1929 stocks began to be worth more than the value of the company. Most people believed that investing in stocks was the flawless way to become rich and that anyone could do it.

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The Great Depression caused havoc all over the United States. The Great Depression was caused by multiple consequences, some being stocks, government policies, and panics from bank failures are just some examples. The economy has gone through hard circumstances. Involving people losing their jobs, the overall economy dropped and industries all suffered from the effects of the Great Depression. The president at the time, FDR, tried everything to reverse the consequences of the Great Depression through enacting programs.

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People sell more stocks the lower the stock fall. As a result, the market crashed. Americans became unemployed and could not pay rent so they became homeless and started to live in dirty conditions. Americans could not even afford to buy food for their families and so they started to wait in line for free food. It was completely based on luck; some people got food and some starved.

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During this time period, the stock market would not have been affordable for the average person and would be considered a luxury. Normal Americans would have to buy stocks on loan if they wanted to invest. Buying stocks on loan is a form of credit, as you would be taking money out of the banks with the understanding that you would need to pay it back later. The uneven distribution of wealth was another major

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The Hawley-Smoot Tariff of 1930 became the highest peacetime amendment in America’s history and was designed to protect farmers and their interests i) This angered both industrialists and foreigners, it seemed almost as if America was declaring economic war on the rest of the world ii) This isolationist policy would not let the rest of Europe recover and let it fall into the hands of Adolf Hitler 14) The Great Crash Ends the Golden Twenties a) As Hoover took office in 1929, the Great depression was setting in i) The prices on the stock market continued to spiral upwards and gave a massive sense of American confidence ii) The Federal Reserve Board helped spark massive speculation that would foreshadow the

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Congress responded by establishing the Reconstruction Finance Corporation and signed a bill authorizing $2 billion in spending in order to save businesses.” Hoover asked Congress to lend money to save our institutions. In return the Congress granted 2 billion dollars to do so. This supports the claim that the economic decisions were most effective to bringing this crisis to an end because the 2 billion dollars were used to save the banks and other businesses. This way people would get jobs to work at these businesses.

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Franklin D. Roosevelt served as president during one of the country’s toughest economic crisis, The Great Depression. The Great Depression was onset by a great slew of economic problems, such as an uneven distribution of wealth and a weak farm economy, but ultimately the stock market crash in 1929. His administration had the difficult job of addressing all the problems with the Great Depression and responding to them quickly, and did so with the First and Second New Deal. His New Deals did not truly end the Great Depression, but it helped the country slowly rebuild the failing economy and put more power into the federal government.

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FDR was looking forward into the future of the economy of the United States with this new policy developed and also with the creation of the FDIC or Federal Deposit Insurance Corporation. 
 The Federal Deposit Insurance Corporation was created in order to protect the money of the Americans in their certain choice of bank. One of the main and horrible effects of the Great Depression had on the American public was that all of the money that they had saved in back accounts were lost and couldn’t be replaced by the banks. A cruel way of loosing someones hard earnings and lifesavings. Which is why The FDIC (Federal Deposit Insurance Corporation), was created because what the FDIC did was that it protected the money of the customers if it was to ever get lost with a guarantee up to a quarter of a million.

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765 Words | 4 Pages

If you got lucky and did not get fired the wages fell and the buying power increased. The americans that were forced to buy on credit fell into debt,and the numbers of repossessions and foreclosures increased steadily. The gold standard fixed currency exchanged around the world, and helped spread economic distress from the U.S. through the world.7When the country elected Franklin D. Roosevelt he promised he would create federal government programs to end the Great Depression.8 The federal government programs allowed people to get more jobs and help the economy increase. Roosevelt was a big influence during this time period and impacted many people, giving jobs to citizens and boosting the economy. After Franklin Roosevelt created the federal government programs it allowed the economy and society to grow and strength from the unlucky situation.

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488 Words | 2 Pages

Good evening Professor and class. I will first be examing the merits and risks of the flat tax to determine whether it is a viable solution to economic growth followed by an examination into the national sales tax (NST). The flat tax is just that, a tax, which sets an even playing field for all (individuals, businesses, and corporations) (Hall & Rabushka, 2007). The key points within this type of tax structure is to invest more money into businesses to allow for continued growth by creating more jobs, more product, therefore, boosting the U.S. gross domestic product (GDP) value and amount of viable tax revenue for the government to function. According to Hall and Rabushka (2007), the flat tax increases work effort, reduces taxes on business, encourages entrepreneurship and once fully implemented the U.S. could see as much as six percent increase in revenue.

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780 Words | 4 Pages

In the early 1930s the labor force in countries that were industrialized saw as much as one forth of its workers unable to find work. Conditions were starting to improve by the mid 1930s, however total recovery did not happen until the end of that decade. This was a very difficult time in United States history and around the world, but it could be said that something good came out of it, central banks throughout the world now try to thwart or moderate recessions. It is unclear whether a change like this would have occurred if not for the

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750 Words | 3 Pages

The first cause of Great Depression was bank failure. It was one of the main causes of the Great Depression. Throughout the 1930s over 9000 banks failed. In 1920s there were a lot of banks.

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