What Caused The Great Depression In America?

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What Caused The Great Depression In America?

2 Answers

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Answer 1

It is believed that the great depression set in after the stock market crash in 1929. But this was not the cause of the Great depression just one of the symptoms. It even rallied for some time and recovered in the 1930s when investors optimistically thought that the depression was temporary. There are number of other factors that led to the depression. It is believed that in most economies there is a cycle of depression and prosperity that recurs from time to time based on the factors of demand and supply. There are factors that can affect the severity of this cycle.

In the 1920s there was a great imbalance in the distribution of wealth between the haves and the have-nots. Then there was the Smoot Hawley Tariff Act which resulted in price rises as a duty of fifty percent was levied on imports. Money was being backed by Gold in the United States and many started to horde it instead of investing or saving. The Fed also increased the liquidity in the market during the 1920s which also affected the subsequent crash after the boom.

Answer 2

The love of money....no other reason, It is an old reason but true in this case! The freedom & new opportunities present after the World I, every nation on the globe had survived a horrendous conflict of never before seen proportions! Millions of armed service people as well as civilians where died. Entire cities in many nations were no more.
With the capacity of the up to now, emerging Industrial Revolution at full development, more people working and producing more consumer goods and in light that the entire globe had potential for selling to, the world's manufacturing was mass producing. People who gave their money to become partial share holders in these vastly profitable businesses. They were making a lot of profits through their investments. Now everyone wanted to be in the Stock Market, so they could get rich quickly just like what they thought was everyone around them. The Stock Markets did not self-police their members especially some who were 'cheating' the investors by selling worthless new stocks. This situations was joined with a new selling technique, you could buy any amount of stocks you wanted "on Margin". You only had to have a part of the cost of the stocks you wanted to buy. This was speculation and not a sound practice, because people were only thinking everything they brought would increase in value and make them money. Many 'sharp' and 'cheaters' sold all their stocks mostly at higher inflated prices and got out of the frenzy of buying and selling of good and bad investment stocks. Those people hoping their stock which they had promised to pay for later...were told to pay their entire bill when the stocks began to lose some of their value. Adding up all the 'promised' money to be paid against what the falling stock now was worth...became the biggest problem to that time in the Stock Market Trading! People didn't have the cash to pay their outstanding obligations, the stock trading values just kept falling, not being worth what was owed for their ownership! The cannibals captured me and had me over for lunch. After they cooked me the had me for lunch!