What Caused The Great Depression Essay

The 1920s to the early 1930s was a time of great despair and negatively affected everyone. All the people were in a frantic panic and nobody could think of what to do. The great depression was a period of unemployment and economic shock, there was no motivation to work. People were lazy and had no hope for their economic system or for improving things. Most researchers and historians say the primary cause of the great depression was the crash of the stock market and the failure of the banking system. That's what everyone believes, but there are many reasons for undergoing the great depression. During that time period, things were a mess and people were all over the place. There were many other causes of the great depression, some major and

The gold standard was the biggest factor that played a role in the great depression besides the stock market crash. The monetary system of the world had still been weak from the renewal of the gold standard after WW2. Soon before the great depression, output, prices, and savings started decreasing dramatically. The only and best way to save economic stability concerning the gold standard was to let prices and wages fall. In the late 1920s and beginning of the 1930s countries tried to hold on to the gold standard by backing paper money with gold reserves. Everyone that had used the gold standard at this time had seen it as the foundation of sound money. Anytime a country had run out of gold, all the supplies, money, and credit slowly disappeared. Whenever countries gained more gold they naturally expanded. Gold was their prime currency of the time and they depended on it to buy everything needed to live. When countries tried to stick to the gold standard it created a rise in currency and countries suffered bank runs. In 1936 more than 24 countries jettisoned the gold standard and many countries can't afford the expensive welfare states, (Fortune 1). Running out of supplies and money isn't the only thing the great depression caused, it also affected jobs greatly, and caused massive unemployment. Labor hours dropped 35% from their previous level before the depression. The rise in aggregate wages caused a big increase in the cost of hiring new workers, (Bordo 1). The great depression was very unprecedented in length, depth, and wholesale poverty. It not only inflicted workers but farmers as well, the nation's production rate rose above the rate that people were consuming the products. The foreign market for American goods was cut down by rising tariffs and war-debt