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1.According to Gary M. Walton and Hugh Rockoff, The Great Depression was the most important economic event of the twentieth century. In this essay, you have the opportunity to address two of the most important questions debated by economic historians of the Great Depression: What caused this unprecedented collapse? Why did the economy remain depressed for so long? (Walton and Rockoff, Chapter 23, page 422)
What caused this unprecedented collapse?
The great depression started in the United States of America on September 1929 and attacked personal income, profits of the firms, tax revenue and caused a big drop in prices. The depression was caused by the depreciation of the stock and later in
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October 1929, it was known everywhere in the world that there was a depreciation because of the crash in stock markets. The Americans had started to believe that there was a progress in the stock market because of the rise in the stock market value of shares which could carry them to higher standards of living until the great depression hit. However, on the mid 1930s the economy began to recover the negative effects of the depression which was significantly seen in the rise of the stock markets. Buying on the margin was another major cause of the great depression in the USA. People over invested in the stock market, which made to increase in the stock market. This was possible because it was made easy for them to buy shares through installments. This attracted many stock investors in the market which caused the rise in the stock market. This increased to the extent that the stock prices were more than the value of the companies. This ceased to exist during the depression, which caused companies to experience losses. Buying items on credit also caused the great depression in that people felt like owning many items at once and they took all at a credit. This was made possible because they bought things on credit and paid them in installments. After the depression people were incapable of paying their debt and that worsened as the great depression took charge. Supply and demand of goods also led to the great depression. Before the depression the firms produced goods in large scale and paid their workers highly a factor which continued even after the depression where people were paid the same and producing the same output. The supply was more and the demand was less which led to the depression. This caused unemployment in the population and this led to 25% of the population unemployed. Why did the economy remain depressed for so long?
The crash in the stock markets led to the fall in the banking sector, which led to loss of confidence. This led to policies which aimed at holding the economy together rather than pushing it forward, this led to the economy being stagnant for a long period of time.
The change in government in 1933 led to the growth of employment phase by phase. The reason why the growth seemed slow, as because it took 8 years to grow the economy to the level it was initially after the 4 year slide in the economy.
Due to the unemployment due to the great depression, it caused the firms to take a long period of time in order to reemploy the people they had sacked. The levelling of the demand and the supply of the goods and services took some time during the recession and dragged the employment along with it. This caused a long time for the recession to occur after the depression.
The financial panic which existed in 1907 and 1893 also led to the great depression because as fear struck on people at the beginning of the depression in 1929, this led to the formation of poor policies which were made to counter the fear rather than solving the problem once and for all. This made the depression take so
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long. 2. Walton and Rockoff pose, perhaps, the most important set of questions facing economic historians of the 1920s: A central question faced by economic historians is whether the disasters of the 1930s were the inevitable outcome of the prosperity of the 1920s and its reliance on a free market economy, or whether they were the result of shocks and policy mistakes of the 1930s. Was there, to put it somewhat dramatically, a fatal cancer growing in the economy of the 1920s that brought disaster ever closer, even as the economic physicians of the day continued to pronounce the patient in good health? (Walton and Rockoff, Chapter 22, page 394). What do you think? Both the prosperity which had occurred in the early 1920s and shocks and policy mistakes were some of the major causes of the great depression. According to me, what likely caused the depression was the shocks and the policies which had occurred in the early 1930s.
Before 1929, the economy was progressing well with the standards of living rising higher than the expected. The stock market thrived well with the people more encouraged to invest in shares through buying the shares in installments. The demand and the supply had been very equal since whatever was being produced in the firms was actually what was demanded in the real economy. People owned multiple things and the banking sector was very okay in terms of the gains. However, in 1929, the catastrophe struck where the people had got shocked because of what happened in the early periods of 1907 and 1893. This caused the people who had bought the shares to sell them, there were few buyers of the shares and many sellers of the shares caused by the financial panic which had existed earlier. This caused the domino effect and caused the economy to collapse at last. The firms produced more and sold less due to lack of demand of the products they were selling and also the wage level was the same for the workers in the
factories. Policies also worsened the situation of the depression since they made policies to solve the short run problems instead of the long run problems. Poor policing saw the decline in the economy. Before the change of the president in 1933, the president had assured people that everything will be okay, but they didn’t listen and instead went on and sold all their shares. The good standards of living and the stock markets progress could have continued being better if they did not get the shock. But in a way the banking sector also contributed to this downfall because it allowed more borrowing because of the projected future progress in the stock market shares. The free market affected the depression in that the consumers over relied in the price mechanism which made the depression possible after the financial shocks.it was the government which came to help the economy recover from the economic shocks. There were natural disasters like drought too which had hit the residents of Texas. This caused the mass exodus of people to better places. The drought was caused by overgrazing, wind erosion and lack of rainfall in that area. The cancer in the early 1920s can also be attributed to the depression but its effect was not as major as the decline in the stock market. The doctors of that day assured the public that everything was okay even though the cancer had hit hard on the patients, which made it hard for the patients to drive the economy In conclusion, the shocks and poor policing had a greater effect in the depression than the overall effect of the drought, market failure due to a reduction in the price of the stock and the cancer which had hit the area. The economic shocks caused the fall in the price of stock which was the major cause of crashing of the economy. 3. Throughout the quarter, we have frequently discussed changes in Americans understanding of liberty and what role the state should play in ensuring the continuation of liberal ideals. As we now know well, this issue sparked sharp debate between the Progressive Era and the New Deal. In this essay, you should consider the Progressive Era (from 1890s to WWI), the WWI era, the 1920s (the New Era), and the New Deal period. What role did economic leaders in these periods think the government should play in protecting and promoting a more liberal, just, and fair society? As you move from one era to the next, please explain what caused shifts in thinking. In the early days in the 1890s, the USA used the laissez-faire economics where the government was refraining itself from regulation of the business activities. As the 20th century approached the government started involving itself in business activities. The congress in 1890 enacted some laws which were to prevent the firms from being monopolies by restoring competition and free enterprises which boosted trade in that period. During the period of the First World War, they passed laws which were to ensure food and drugs were correctly labelled and meat was to be inspected before sold. During that period cancer had become one of the disasters which had hit the people of that time. Also the government formed a new federal banking system to control the national money supply to the economy. During the 1920s the banking system had thrived and the economy was growing at a fast rate, the leaders controlled the money supply at that time, the industries were growing at a fast rate with the supplier meeting the demand in the market. This made the stock prices at that time to rise and therefore led to more buying of stock. The living standards in this period were good. However, this happened until 1929 In the new deal period, the largest changes in the government role occurred in this period where President Franklin D. Roosevelt's responded to the Great Depression. This period had the worst business crisis and the worst unemployment in American history. Many citizens had thought that capitalism had failed and therefore looked to the government to correct the messes caused by capitalism. . Roosevelt and the congress made laws which gave the government the power to intervene over the economy. These laws regulated the sale of stock, gave power to the workers to form trade unions, regulated the working hours and the wage to be paid to each worker, creating of farm subsidies and insurance of the deposits made to the bank. These laws made a great impact in the USA and created a new order in the nation. They made the country, revive from the great depression and improved the banking sector, companies as well as the personal income. References Walton, G. M., & Rockoff, H. (2014). History of the American economy. Mason, OH, USA : South-Western ; Australia : Cengage Learning.
The stock market crash of 1929 was the primary event that led to the collapse of stability in the nation and ultimately paved the road to the Great Depression. The crash was a wide range of causes that varied throughout the prosperous times of the 1920’s. There were consumers buying on margin, too much faith in businesses and government, and most felt there were large expansions in the stock market. Because of all these positive views that the people of the American society possessed, people hardly looked at the crises in front of them.... ...
The Great Depression tested America’s political organizations like no other event in United States’ history except the Civil War. The most famous explanations of the period are friendly to Roosevelt and the New Deal and very critical of the Republican presidents of the 1920’s, bankers, and businessmen, whom they blame for the collapse. However, Amity Shlaes in her book, The Forgotten Man: A New History of the Great Depression, contests the received wisdom that the Great Depression occurred because capitalism failed, and that it ended because of Roosevelt’s New Deal. Shlaes, a senior fellow at the Council on Foreign Relations and a syndicated financial columnist, argues that government action between 1929 and 1940 unnecessarily deepened and extended the Great Depression.
The Great Depression often seems very distant to people of the 21st century. This article is a good reminder of potential problems that may reoccur. The article showed in a very literal way the idea that a depression can bring a growing country to its knees. The overall ramifications of the event were never discussed in detail, but the historical significance is that people's lives were put on hold while they tried to struggle through an extremely difficult time.
1.The great depression was a time between late 1929 to 1939 and was completely ended during World War Two. It started with a series of events, most famously the Wall Street stock market crash, that induce poverty on the American citizens. It caused the downfall of the US economy.
Some say that the great depression was caused partially by social democracy and planned economies. And although this could be true, it originally started from debts from World War I, and of course the stock market crashing in 1929.
The Great Depression was a period in United States history when business was poor and many people were out of work. The beginning of the Great Depression in the United States was associated with the stock market crash on October 29, 1929, known as Black Tuesday. Thousands of investors lost large amounts of money and many were wiped out, lost everything. Banks, stores, and factories were closed and left millions of Americans jobless and homeless (Baughman 82).
The Great Depression was one of the most important historical events that has happened within the last century that impacted every Americans life one way or another. There were many factors that could be an explanation of why The Great Depression happened, but there is no one definitive list of the reasons of what caused The Great Depression. It was a mixture of events in the United States and outside of it that probably led to this period of time to happen. The main reason that everyone could agree on was the event of the Wall Street Crash of 1929. Because of The Crash, it made people go on a bank run which made thousands of banks to close because they simply did not have all the money for all the people wanting to withdraw their savings. Because everyone was trying to take their savings out, most people were turned down by the bank and essentially lost of their savings in the bank. The banks were failing and because they had no more money left, this stopped the banks from having available credit for people to use which made matters even worse for the people. This leads people to poverty and were left with nothing. Because people were poor and were scared of spending their money now, it made people stop buying extra things that weren't essential to live. This was the cause of the unemployment rates during this time period because if no one was buying anything, then there was no reason to keep extra workers for things people are not buying.
By 1929, the U.S. economy was in serious trouble despite the soaring profits in the stock market. Since the end of WWI in 1918, farm prices had dropped about 40% below their pre-war level. Farm profits fell so low that many farmers could not pay their debts to the banks; in turn this caused about 550 banks to go out of business. The nations illusion of unending prosperity was shattered on Oct. 24 1929. Worried investors who had bought stock on credit began to sell it. A panic developed, and on October 29, stockholders sold a record 16,410,030 share. By mid-November, stock prices had plunged about 40%. The stock market crash led to the Great Depression, the worst depression in the nation’s history (until…2014 ☺). It was a terrible price to pay for the false sense of prosperity and national well being of the Roaring Twenties.
Post the era of World War I, of all the countries it was only USA which was in win win situation. Both during and post war times, US economy has seen a boom in their income with massive trade between Europe and Germany. As a result, the 1920’s turned out to be a prosperous decade for Americans and this led to birth of mass investments in stock markets. With increased income after the war, a lot of investors purchased stocks on margins and with US Stock Exchange going manifold from 1921 to 1929, investors earned hefty returns during this time epriod which created a stock market bubble in USA. However, in order to stop increasing prices of Stock, the Federal Reserve raised the interest rate sof loanabel funds which depressed the interest sensitive spending in many industries and as a result a record fall in stocks of these companies were seen and ultimately the stock bubble was finally burst. The fall was so dramatic that stock prices were even below the margins which investors had deposited with their brokers. As a reuslt, not only investor but even the brokerage firms went insolvent. Withing 2 days of 15-16 th October, Dow Jones fell by 33% and the event was referred to Great Crash of 1929. Thus with investors going insolvent, a major shock was seen in American aggregate demand. Consumer Purchase of durable goods and business investment fell sharply after the stock market crash. As a result, businesses experienced stock piling of their inventories and real output fell rapidly in 1929 and throughout 1930 in United States.
October 29th, 1929 marked the beginning of the Great Depression, a depression that forever changed the United States of America. The Stock Market collapse was unavoidable considering the lavish life style of the 1920’s. Some of the ominous signs leading up to the crash was that there was a high unemployment rate, automobile sales were down, and many farms were failing. Consumerism played a key role in the Stock Market Crash of 1929 because Americans speculated on the stocks hoping they would grow in their favor. They would invest in these stocks at a low rate which gave them a false sense of wealth causing them to invest in even more stocks at the same low rate. When they purchased these stocks at this low rate they never made enough money to pay it all back, therefore contributing to the crash of 1929. Also contributing to the crash was the over production of consumer goods. When companies began to mass produce goods they did not not need as many workers so they fired them. Even though there was an abundance of goods mass produced and at a cheap price because of that, so many people now had no jobs so the goods were not being purchased. Even though, from 1920 to 1929, consumerism and overproduction partially caused the Great Depression, the unequal distribution of wealth and income was the most significant catalyst.
There were numerous causes and effects of the Great Depression. It was a divergent distribution of wealth. The nation’s wealth increased extremely but they did not distribute it evenly. The economy didn’t have any way of paying the money back. It created a financial crisis when Europe couldn’t purchase goods from the United States. It was mandatory for Germany to pay for World War I due to the Treaty of Versailles. This debt made the United States pass the Forney-McCumber Act which created high tariffs. There were a variety of reasons as to why the Great Depression started.
Banks all around, especially the large ones, sought to support the market before it could crash down. As the stock prices crashed, banks struggled to keep their doors open (“Economic Causes and Impacts”). Unfortunately, some banks were unsuccessful. Customers wanted their money out from their savings account before it was gone and out of reach, leaving banks insolvent (“Stock Market Crash of 1929”).
] This catastrophic event is caused by the accumulation of a large scale of speculation by not only investors but also banks and institutions in the stock market. Though the unemployment rate was climbing during the 1920s and economy was not looking good, people on Wall Street were not affected by the depressing news. The optimism spread from Wall Street to small investors and they were investing with the money they don’t have, which is investing on margin as high as 90%. When the speculative bubble burst, people lost everything including houses and pensions. The main reason ...
The Great Depression all started in the summer of 1929 when consumer spending dropped and unsold good began to pile up which slowed production. As this was going on, stock prices continued to rise and by the fall, that year had reached levels that could not be justified by anticipated future earnings. The stock market bubble finally burst on October 24, 1929, as investors
The Great Depression was a period of first-time decline in economic movement. It occurred between the years 1929 and 1939. It was the worst and longest economic breakdown in history. The Wall Street stock market crash started the Great Depression; it had terrible effects on the country (United States of America). When the stock market started failing many factories closed production of all types of good. Businesses and banks started closing down and farmers fell into bankruptcy. Many people lost everything, their jobs, their savings, and homes. More than thirteen million people were unemployed.