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Factors That Led To The Great Depression

1505 words - 7 pages

It was December 31, 1928, and financial heads everywhere were in total bliss. The 1920’s was a decade of good times and wealth. They thought the trend was here to stay. In 1929, the prosperity ended in the United States. Working class individual were buying stocks but because no regulations was in place to over see production and control the disparities of wealth gap between the working class citizens and the well to do exploded (Bali 225). This set the tone for the overproduction in industry that led to the bubble because many workers could not afford to buy the industrial output. Also, during the 1920’s, credit was introduced and the stock market was booming. What caused the worst depression in history? What events led up to the economic failure? Was the government aware that the crash was coming? Traditionally, President Roosevelt has been lauded as a savior of the economy and one of the greatest presidents the United States has ever had. However, there is another way to look at the causes of the Great Depression.
Average working individuals went into debt stocks had no defined value, but was based upon demand. If the stock was popular, the price increased. If the stock was unpopular, then the price decreased. For example, many people in the 1920’s made so much money that they thought they could never lose with buying stock in American companies. Men such as Jesse Livermore became famous from buying and selling stock from the US treasury (Chancellor). This was an alternative way to become wealthy away from the Rockefellers and the Carnegies who made their fortunes from oil wells and steel mills. Many people who were money lenders gained success because of stock. Little did anyone know, the Great Depression was on the horizon.
America had been suffering from financial uncertainty for centuries. According to Bali, there have been forty-seven recessions in the United States since 1790 (230). For example, the First Bank of the United States, started by Congress, collapsed in 1811 (Gjerstad 440-447). The Second Bank of the United States replaced the First Bank of the United States in 1816 (Gjerstad 444-450). America was familiar with banking crises. In 1893 a panic occurred in America when the stock market crashed due to over production of the railroads and weak risky capital decisions (Adelmann 35). Six hundred banks had closed, also 15,000 business went bankrupt, gold was depleted and the U.S. Treasury was forced to sell Wall Street, John Pierpont Morgan high yield bonds at low rates
(Adelmann 36). Unemployment also sky rocked among the working class in 1893. This crash was due to workers being paid less than what they were producing. Working average people cause not afford to buy back as much as what was being produced. Thus, it will always be insufficient demand for products.
In 1907, America experienced its worst banking crisis up to that point; the Second Bank crashed down to half of its original worth. In response, investors rushed...

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