Causes Of Great Depression 1930’s Essay

1585 words - 6 pages

From 1929 to 1939 the United States fell into Great Depression, taking the rest of the world with it. The world, let alone the U.S. had never been a witness to suck full-scale economic depression. Numerous factors contributed to its severity. Measures were taken internationally and locally to alleviate its repercussions.Some of the most important theories that are proposed that lead to the Depression are, the stock market crash if 1929, the collapse of the gold standard, collapse of international trade, Federal Reserve policy and many other influences. I feel that the major cause of the Great Depression in the world was the structural weaknesses in the international economy. Decreased desires to borrow and spend for investment in the face of depressed conditions, decreased flows of savings in nations that normally lent abroad, decreased creditworthiness of borrowers, and increased official restrictions on international transfers of funds.The stock market crash that happened in 1929 was a very rapid event. The stock market was propelled by borrowed cash. Shares could be purchased from brokers for as little as "10 per cent of their value" (Berton, p 29). People didn't mind the high interest rates, because the value of the stocks was soaring. A huge amount of unsecured consumer debt made by this speculation left the stock market practically off-balance. A lot of people, who wanted to invest, wanted to make a fortune off this event, so they invested their life savings, mortgaged their homes and cashed in safer investments such as treasury bonds and bank accounts. As the prices were rising, economic analysts were warning their clients that the market has a chance of crashing, although the big investors that were leading at the time were just ignoring them. Many banks also wanted to take advantage of this and started to speculate dangerously with their investments. As time passed by, stocks were decreasing in value day by day "stocks were now half the prices of what the average used to be" (Kindleberger, p 105). This sudden fall of stock prices was a contribution to the decline of the business activity. A lot of businesses would lose sales which eventually put them out of the competition, only a few out of hundreds survived, those were the oldest and strongest. Since U.S. was a trading partner with Europe, all these businesses going bankrupt didn't do any help in the trade market either. Imports and exports were slowly declining, and Europe couldn't depend on U.S. anymore for primary products that were important to countries as everyday use. Plenty of cash being released for speculation, financial changes and inventions that let people speculate with money that they didn't have and "thoughtless cheerleading from those in authority, who fabricated reasons for the market to increase when there were none" (Termin, p 44), these are all causes of the stock market crash but not causes of the Great Depression. The stock market crash was a tremendous event,...

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