5 Causes Of The Great Depression Essay

5 Causes Of The Great Depression Essay-45
If you didn't live through the Great Depression that started in the late 1920s and lasted until the beginning of World War II, it's hard to imagine just how rough many ordinary Americans had it.At the Depression's peak in 1933, the nation's Gross Domestic Product had been cut roughly in half, and nearly one in four American workers was unemployed.

If you didn't live through the Great Depression that started in the late 1920s and lasted until the beginning of World War II, it's hard to imagine just how rough many ordinary Americans had it.At the Depression's peak in 1933, the nation's Gross Domestic Product had been cut roughly in half, and nearly one in four American workers was unemployed.

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Here's a list of five factors that helped lead to the Great Depression: Robert S.

Mc Elvaine, a history professor at Millsaps College in Mississippi and author of "The Great Depression: America 1929-1941," says that the U. shifted during the 1920s to an economy heavily dependent upon consumption of mass-produced goods, ranging from automobiles to radios.

Even after the stock market collapsed, the Fed kept increasing interest rates, Bernanke noted. (Here's an Investopedia article on the Gold Standard.) When panicked investors started trading their dollars for gold, the Fed moved to thwart them.

"To stabilize the dollar, the Fed once again raised interest rates sharply, on the view that currency speculators would be less willing to liquidate dollar assets if they could earn a higher rate of return on them," Bernanke explained in his speech.

That's because its board can use monetary policy — control of the supply of money and credit — to stimulate the economy when it needs a boost, or to put on the brakes when inflation is starting to creep upward.

But in a 2004 lecture, former Fed Chairman Ben Bernancke detailed his theory that 90 years ago, the Fed dropped the ball with policy blunders that helped cause and prolong the Great Depression.While sales of those products drove up profits for factory owners and retailers, most American workers' wages grew much more slowly.Eventually, he notes, "people didn't have enough money to buy more things and keep the economy going." Businesses tried to cope by extending consumer credit and allowing people to gradually pay off their purchases, but they didn't have enough income to keep buying new stuff as well.Louis, two men who survived the Depression describe how people around them often were so desperate for food that they eagerly rooted through garbage bins at markets for discarded vegetables and spoiled chicken carcasses.Even after Franklin Roosevelt's New Deal program eased some of the deprivation, the nation's battered economy continued to struggle, right up until the war brought a massive surge in government spending and created jobs at defense plants for those who didn't go off to fight overseas, as this article from the FDR Library explains.The Smoot-Hawley Act, which was written in early 1929 when the economy was still going strong but became law after the Wall Street crash, raised U. That bit of history worries many people today, due to President Trump's fondness for imposing tariffs in an effort to protect U. industries, as detailed in this May 2019 Bloomberg article."Whichever one of these you want to blame for how bad the Depression was — the maldistribution of income or tariff barriers, the Trump administration seems to want to do both," Mc Elvaine says.And Congress in 2017 passed a massive tax cut package, which most Americans see as not benefiting them, according to this April 8 NBC-Wall Street Journal poll.There's a difference between investing and speculating, which Investopedia defines as putting your money into high-risk investments in hopes of making a killing.Starting in 1928, the Fed — hoping to put the brakes on Wall Street speculators who were investing borrowed money — started raising interest rates.That policy succeeded a little too well, as evidenced by the stock market's catastrophic drop in October 1929. — like many other countries — was on the Gold Standard, meaning that the dollar was redeemable in gold and pegged to its value.

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