Great Depression Essay

1230 words - 5 pages

Frensisca Aristil

Eco 2013-169825

Extra Credit Paper

The Great Depression

On Tuesday October 27th, 1929, the United States experience the worst crash of the stock market in history. It was so severe, economist called that Tuesday “Black Tuesday” Since many banks also invested in the stock market; the crash caused many banks to close their doors. Many people tried to sell their stocks but no one was buying. Although the Stock Market crashed, many optimists were hopeful that the economy will turn around. John D Rockefeller stated that: “These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned ...view middle of the document...

Since the dust storm destroyed their crops, they couldn’t pay back, the bank foreclosed on their small farms; they couldn’t feed themselves and their family so they became homeless.

The great depression caused by the major bank failures, stock market crash, deflation in asset and prices, dramatic drop in demand and credit and disruption of international trade. Nearly two months after the crash of the stock market, stockholders lost over $40 billion. By 1930, there 9,000 banks that closed, at that time there were no insurance so many people ended up losing their savings. The surviving banks could not create new loans due to lack of asset. There were demand-driven theories known as Keynesian economics refer to the breakdown of the international trade and institutional economists, they argued that under-consumption and overinvestment caused an economic bubble. British economist John Maynard Keynes argued in his book General Theory of employment interest in money that “lower aggregate expenditures in the economy contributed to a massive decline in income and to employment that was well below the average. In such a situation, the economy reached equilibrium at low levels of economic activity and high unemployment.” Keynes’ idea was to keep people fully employed and the government would run on deficits when the economy slowed down. On the contrary, the monetarist believed that the depression started a normal recession but as a result of the significant policy mistakes by monetary authorities caused the money supply to shrink which led the recession to the great depression

Many economists believed that the sudden decline in international trade caused the economy to worsen. They also blamed the Smoot-Hawley Tarrif Act (an act enacted in June 1930 that increased U.S. tariffs on 20,000 imported goods) for worsening the depression as result of a decline in international trade. Although international trade was only a small part of the economy, it still impacted some businesses such as farmers. American exports decreases and prices also fell, the most impacted farm commodities were cotton, wheat, tobacco and lumber. Since the exports fell, many farmers defaulted on their loans.

American economist Irving Fisher believed that the main factors of the great depression were over-indebtedness and deflation. He believed that loose credit to over-indebtedness fueled speculations and asset bubbles. Fisher created an outline of nine that interacted with one another under the condition of over-indebtedness and deflation to create mechanics of boom to bust. The factors are as followed;

1. Debt liquidation and distress selling
2. Contraction of the money supply as bank loans are paid off
3. A fall in the level of asset prices
4. A still greater fall in the net worths of business,...

Other Papers Like Great Depression

The Great Depression Essay

831 words - 4 pages Nveen Salama Elizabeth Wilkins HIS 132-4238 18 April 2016 The Great Depression During the 1930s and 1940s, the United States experienced a period of extreme economic instability and decline now referred to as the Great Depression. The Great Depression led to massive unemployment and a dramatic drop in the stock market. Though most people were aware of the Great Depression of 1929, few know of the many Americans who lost their homes, life

American Great Depression Essay

1122 words - 5 pages 'The economy of America was a bubble fit to burst'. Argue for or against this statement with your knowledge of the reasons for the depression. 'The economy of America was a bubble fit to burst' is a fitting statement to make in comparison to the great depression of America during the 1920s and 30s, and I agree with it; this is because the stock market was beginning to crash, and when news of its status reached American citizens, people began

Great Depression 8

2039 words - 9 pages "The Great Depression of the 1930's was a worldwide phenomenon composed an infinite number of separate but related events." The Great Depression was a time of poverty and despair caused by many different events. Its hard to say what caused this worldwide depression because it's all based on opinion as opposed to factual data. There are many contributing factors but not one specific event can be pin pointed for starting the depression. It is

The Great Depression

2686 words - 11 pages The Great Depression The Great Depression was an extremely severe worldwide economic downturn that left many homeless and even more jobless. The depression originated in the U.S., but affected many countries throughout the world. The time period of The Great Depression varied depending on the country, but first began in the late 1920’s. It ended in the late 1930’s or early 1940’s when the Second World War began. It devastated virtually

The Great Depression: Causes

952 words - 4 pages Causes of The Great Depression The 1920’s marked a period of economic prosperity and happiness among the people, but it was not until the end of this decade that the financial anguish had been noticed. The stock market crash of 1929 came as a shock to most Americans and especially the bankers, but looking at the causes of the Great Depression, it is pretty clear how America entered this period. Not only was there poor economic

The Great Depression

1112 words - 5 pages Great Depression was one of the most severe economic situation the world had ever seen. It all started during late 1929 and lasted till 1939. Although, the origin of depression was United Sattes but with US Economy being highly correlated with global economy, the ill efffects were seen in the whole world with high unemployment, low production and deflation. Overall it was the most severe depression ever faced by western industrialized world

The Great Depression - 734 words

734 words - 3 pages Parthivi Narang History Chapter 3 presentation Mr. Godry THE GREAT DEPRESSION “Dear Mr.Bennett: Please help me by standing me some money and will send you my engagement ring and wedding ring as security...My two rings cost over $100 over 15 years ago but what good are they when the flour is nearly all done and there isn't much to eat in the house...” This was a real note sent to the Conservative part leader, Richard Benford Bennett

The Great Depression - 839 words

839 words - 4 pages The Great Depression is comparable to Lennie and George's life. I would like to give a comparison of George Milton and Lennie Small to the Great Depression. The time that this story took place was during the Great Depression. John Steinbeck captured the reality of this most difficult time. During the Great Depression people needed to travel together to share chores and duties to make a living until something better came

Understanding The Great Depression

2868 words - 12 pages experienced a crippling lack of demand, railroad managers were desperate because fewer people utilized the rails, farmers were ruined by deflated prices, wage-earners were facing unemployment and successive wage cuts. Everybody fought the long and arduous, discouraging battle for subsistence. This paper explores three aspects of the Great Depression: why it happened, the relationship between workers and unions, and how the Depression affected the

The Great Depression - 1722 words

1722 words - 7 pages The Great Depression Before the Depression started I had no complaints about my life. I had a beautiful wife named Grace and two twin boys named Jon and Jamie. We lived on a beautiful six acre lot with your typical white picket fence and the family dog Harley. I opened up my own shoe repair business in New York City after retiring from the mining field. In the past four years of owning the shoe shop I would say it had been very successful. I

The Great Depression - 786 words

786 words - 4 pages two blouses and a skirt in my possession. I didn’t understand the severity of what was going on at the time, all I knew was I couldn’t have things.” This was how Fran Suddath explained her experience as a six year old girl living during the Great Depression and the sacrifices her family had to make in order to survive during the economic low. The Great Depression was the longest and most devastating decade in American history and caused the

Related Essays

Great Depression Essay

449 words - 2 pages Though most Americans are aware of the Great Depression of 1929, which may well be "the most serious problem facing our free enterprise economic system", few know of the many Americans who lost their homes, life savings and jobs. Americans faced vast problems during the eleven years of depression’s span. The paper primarily focuses on what life was like for farmers during the time of the Depression. By the 1930's, thirteen million workers

Great Depression Essay

544 words - 3 pages won majorities in both houses of Congress. Roosevelt won, receiving 57.4 percent of the popular vote to Hoover's 39.7 percent. It was obviously that Roosevelt benefited primarily from Hoover's failure to fight the Great Depression.

Great Depression Essay

960 words - 4 pages Sarah J. Smith HIST Essay 3 The Great Depression was a hard time for most people in America. It was a time when most people had very little money, if any. One of the main reasons for the depression was because of the stock market crashed on Thursday, October 24, 1929 or also called Black Thursday. The sense of confidence was reflected in the stock market. Stock sales had risen steadily for several years and as demand rose, so did stock

Great Depression Essay 1432 Words

1432 words - 6 pages in the U.S. In the 1920s, the United States entered the period of relatively little federal government’s involvement in business activities and markets. That was the age of jazz and freedom of the American society, which tragically ended on October 29, 1929, when the American stock market crashed (PBS, n.d.). Before the Great Depression, the American society witnessed huge economic and social imbalances and income disparities across major social