What Caused The Great Depression

The Great Depression was a period of time when the majority of the population was unemployed which caused the United States economy to plummet. People’s personal income decreased dramatically, the profit people and companies made decreased, the governments tax revenue decreased as well, the price of things dropped because the value and worth of things dropped as well. During this time many people lost their homes due to foreclosure because they did not have a steady source of income to be able to pay off their debts. The majority of families decided to go on the road and try to find a place that was looking for workers so they can settle down and have a place to live. The Depression lasted over a decade and has been the worst economic depression

of all time. This did not happen overnight there were a number of events that took place before and those unfortunate events led up to the Great Depression. Some of these significant events were: the crash of the stock market in 1929, the closing of banks, the loss of jobs for the American people, and the halt on international trade.
The stock market crash of 1929 is what most people believe to be what led up to the Great Depression even though this was not the only even that caused the depression it is believed to be the most significant.

The stock market was so unregulated that many people started margin buying which meant that customers borrowed up to 75 percent of the purchase price of stocks, in result that lured many speculators and less creditworthy investors into the stock market. The Federal Reserve warned banks not to lend money because many of the people investing would not be able to pay back their debts if the prices dropped but people didn’t listen. The stock market began falling in early September but the investors still ignored the warning. Between October 24, 1929 and October 29, 1929 more than 28 million shares changed hands in frantic trading. It is then that investors found themselves in a lot of debt so they began trying to sell their stocks but no one was willing to buy any stocks at any

price.
Another cause of the Great Depression was bank closure and the fear of the people in spending any of their money.

Due to the stock market crash some banks were forced to close their doors without warning and without letting people withdraw their money. When the doors closed the money people had deposited was lost resulting in the loss of trust the public had with banks so they were no longer depositing money which meant that the banks did not have much money to lend out or invest. This resulted in the closure of even more banks because they did not have any more funds. The public not only stopped storing their money in banks but also stopped spending and started saving their money instead because they were unsure of the future that lied ahead of them. They stopped buying manufactured products which resulted in the loss of profits from those companies and eventually forced them to stop production and close down and many workers lost their jobs increasing the unemployment rate. This was the beginning of a cycle where less public spending meant less company revenue, which also resulted in the loss of jobs for the current employees of those companies resulting in a high rate of unemployment, and without steady jobs spending was then again affected because of lower family

income.
When American companies found themselves with large amounts of inventory and unable to keep employees they had to find ways to try and remain open. In order to encourage Americans to spend what money they did have on only American made products the government created new taxing laws. These laws increased taxes on all imported items from other countries and the idea behind this was to help American companies be able to sell their products. If these laws would have been successful it would of created a positive cycle by increasing the publics demand of American made products, thus reducing the large amount of left over inventory and the manufactures would have been able to increase the prices of their goods due to the rise in demand for their products this would’ve boosted the already damaged economy. Instead this strained relations between the countries that imported a large amount of products to the United States. Those countries now had a drop in exports because they couldn’t afford the high import taxes. Trade relations with countries was now affected in a negative way and so international trading that was normally very profitable for both the United States and the other counties was now halted resulting in further damage to the economy.
The Great Depression was the worst economic depression to date and it will most likely remain as the most feared economic state that any country could get themselves into. America made many mistakes and those mistakes resulted in the depression but now banks are required to hold a certain amount of the publics’ deposits so that they will not have to close down again. The stock market is also a lot more regulated than it was before. There are still people out there that are afraid of something like that happening again but the chances of that happening again are very low.