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The Great Depression Essay

1578 words - 6 pages

The Great PAGE \* MERGEFORMAT 2
The Great DepressionMany factors played a role in causing the Great Depression. A major cause of the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920's. Another factor was the extensive stock market speculation by investors that took place during the latter part of that same decade which led to the panic on the stock market and the crash now called Black Thursday. The Great Depression was the most terrible and longest economical collapse of the industrial world, continuing from the end of 1929 until early 1939. The main causes for the Great Depression were a combination of unequally distributed wealth, the stock market crash, and over production of goods. This essay will outline these three causes and how they helped to contribute to the Great Depression.The United States had a rapid economic growth right after the war. The economic system was growing outrageously without having the proper control of the government. The big industries were booming and approximately 31% of the wealth of the United States was in the hands of only 1% of the citizens (Socyberty, 2007). The difference of the wealth of the American people shaped an unsound economy. Money was dispersed very differently between the rich and the middle-class, between industry and agriculture within the United States, and between the United States and Europe (Kutler, 2003). The unequal distribution of wealth existed on many levels. This imbalance of wealth created an unstable economy. The excessive speculations kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the unequal distribution of wealth, and bank failures, caused the American economy to collapse.Billions of dollars were invested in the stock market as people began speculating on the rising stock prices and buying on margin. The enormous amount of unsecured money created by this dramatic ordeal left the stock market essentially off-balance. Many investors were caught up in the race. Believing nothing could go wrong, they invested their life savings. Many got the funds to invest by mortgaging their homes and cashing safer investments such as treasury bonds and bank savings accounts.As the prices continued to rise, some economic analysts began to warn of an impending correction. Unfortunately, most investors ignored the economists' warnings. They believed the strong market would continue indefinitely. Many banks, eager to increase their profits, began speculating dangerously with their investments. Finally, in October 1929, the buying craze began to decline, and was followed by an even wilder selling craze.On Thursday, October 24, 1929, the bottom began to fall out of the market. Prices dropped greatly as more and more investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars. This event is named Black Thursday...

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