The Great Depression And The New Deal

2036 words - 8 pages

History 130611/29/10The Great Depression and the New DealThe Great Depression and the New DealThe Great Depression can be defined as an "economic slump" in North America and other industrialized areas of the world. The Great Depression began in 1929, as a result of the drastic stock market crash on October 29 of that same year. It lasted until about 1939 and was said to be the "longest and most severe economic depression ever experienced by the industrialized Western world." It has been used as an example of how far the worlds economy can decline. It was an immense tragedy that placed many Americans out of work, and was the begging of government involvement in the economy and society as a whole.There are many factors that resulted in the great depression. Many people assume that the stock market crash of October 1929 is the same as the Great Depression, however it is only one of the major causes that led to the Great Depression. Around December of 1929 it was reported that stockholders had lost over $40 billion. The market regained some of its losses by the close of 1930, but the amount was not sufficient enough to prevent the economic downfall(Kelly).After the first World War from 1914-1918, many countries struggled to pay their war debts and reparations as Europe began to rebuild from the destruction and devastation caused by the war, thereby causing economic strangulation in many European countries. Due to their inabilities to repay the war debts this caused severe economic crisis".The huge cost of World War One caused many European Countries to abandon the gold standard. This resulted in inflation. Following the war most of these countries returned to the gold standard to try and counter the inflation, unfortunately, this resulted in deflation which lowered prices but increased the real value of debt.After World War One many European countries owed a lot of money to American banks. The loans were high and the countries could not repay on their loans The American government refused to lower the debt or forgive the loans, as a result the countries began to borrow more money to pay off their debt. However, as the American Economy began to slow down the European countries found it more and more difficult to borrow money. In addition, The United States had high tariffs or taxes so that the European countries could not make money selling their products in the United States markets. The countries began to default on their loans.Throughout the 1930s over 9,000 banks had failed, at that time bank deposits were uninsured and therefore people lost their savings. Banks that had invested large portions of their clients saving in the stock market were forced to close due to the market crash. Seeing those banks closed caused another panic across the country. Fearful that they would lose their saving people rushed to banks that were still in operation to withdraw their funds. This massive withdrawal of cash caused additional banks to close. Those individuals...

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