The Great Depression: Causes Essay

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 diversification but an uneven distribution of wealth and a poor international debt structure.
The first major cause of the Great Depression “was a lack of diversification in the American economy in the 1920s. Prosperity had depended excessively on a few basic ...view middle of the document...

” (Brinkley 604) In the 1920’s people began to buy all products on credit because it was the fastest way to get what they wanted when new items would hit the market. Having little knowledge of how credit cards actually worked, most people found themselves in debt and going to banks to take out loans, loans they would not be able to pay off. As Brinkley states, “although most American bankers were very conservative, some of the nation’s biggest banks were investing recklessly in the stock market or making unwise loans. When the market crashed and the loans went bad, some banks failed and others made the crisis worse by contracting already scarce credit and calling in loans that borrowers could not pay.” (604) Ultimately all of these financial problems would lead to the stock market crash of 1929, ‘Black Tuesday,’ after a week of steadily rising instability, all efforts to save the market failed.” (Brinkley 603) Although this is said to be the most known cause of the Great Depression, it is clearly obvious that there were many other problems before this one had even presented itself.
The failure of the American government leads to more crisis during the Great Depression creating even more financial troubles. “The American government refused to forgive or reduce the debts. Instead, American banks began making large loans to European governments, which used them to pay off their earlier loans. Thus debts were being paid only by piling up new and greater debts.” (Brinkley 605) After World War I, America became greedy and demanded that all the European nations in the war pay off their debts, especially once they noticed the economic struggle they were in. The American government foolishly created an even bigger problem by trying to get their dues from the...

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