This website uses cookies to ensure you have the best experience. Learn more

The Causes Of The Depression Essay

1186 words - 5 pages

During the 1930's there was a world wide economic crisis known as the great depression, which effected many countries including Europe and America. The great depression had managed to affect a vast amount of different industries such as agriculture and finance bringing them down to an almost standstill causing unemployment rates to increase and consumer demand to decrease.The causes of the great depression are debateable due to different economists theory on government policies and macroeconomics. However, in this essay the causes of the great depression and how it had escalated to a world - wide scale problem will be discussed.In the view of Keynes, a depression is a case of "severe recession, where people hoard money no matter how mush central banks try to increase money supply". To cure the depression, Keynes had believed that the government should start to do what consumers were not doing, like increase the spending. He had referred to this as "priming the pump".In 1929, the Federal Reserve indexes of industrial activity and factory production were at their highest. This meant that firms and factories had a lot of confidence in the economy and started to increase production. However the industries had failed to recognise that the economy had weakened but still kept producing. The weakening of the economy was due to supply outweighing the consumer demand and businesses misjudging the consumer demand and inventories. This had resulted in the reduction of buying and the cut back of production. This can then cause redundancies in employment, which can lead to the lack of demand due to low incomes. Therefore it had all turned into a vicious cycle.Other signs of the industries within the USA looking economically unhealthy included the slow decrease in freight carloads, industrial production and wholesale prices. This all shows that consumer demand was slowly decreasing and production was contracting due to the lack in demand. This can also cause some of the firms in the industries to fail. As the monetarist and Keynesians believe that changes in demand affect output over a period of several years such as the Great depression. Here the rate of growth has been affected by demand induced recessions. In USA the growth rate around the time of the depression was at almost zero. This can be been explained by the demand factors already explained.During the 1920's there was a great gap between the poor and the rich, which meant that there was unequal distribution of wealth causing misdistribution of purchasing power. The rate of wages increased a fraction less then the rate of productivity increase. This meant that if production costs fell, wages rose slowly and prices remained constant, therefore the benefit of the increased production was all profit.However the proportions of these profits that actually went to farmers, factory workers and other potential consumers was very little, and therefore they could not afford to buy a lot of the more luxury...

Find Another Essay On The causes of the depression

Causes of the Great Depression Essay

755 words - 3 pages Causes of the Great Depression The Great Depression also called Depression of 1929, or Slump of 1929, began in 1929 and lasted until 1939. It was the longest and most severe depression ever experienced by the industrialized world. Though the United States economy had gone into depression six months earlier, the Great Depression may said to have begun with a catastrophic collapse of the stock market prices on the New York Stock Exchange

Causes Of The Great Depression Essay

3203 words - 13 pages Causes Of The Great Depression Missing Works Cited Between the late 1890’s, after the panic of 1893, and the late 1920’s, the American people led good lives in which most prospered. In the 1920’s the problems that led to the Great Depression were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull market is a stock market that is based on speculation. Speculation was a system of borrowing money to

Causes of the great depression

3278 words - 13 pages the real culprit. The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit. If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but can be put under two main categories. The responsibility for the Great Depression falls not only on the

causes of the great depression

582 words - 2 pages The Great Depression was a decade of poverty for many United States citizens. Starting in 1929, The Great Depression was a rough time not only for the U.S. but for many other countries. There are many causes for the Depression but the main cause was the combination of the greatly unequal distribution of wealth throughout the 1920's and the extensive stock market speculation(Gusmorino, 1). Other causes were the unsteadiness of the stock market

Causes of the Great Depression

815 words - 3 pages The Great Depression was the most catastrophic economic disaster in American history. It affected all of the US from sea to beautiful shining sea. Old and young, rich and poor, black and white, everyone suffered the consequences of the over extravagant Roaring Twenties. Businesses closed, everyone was up to their neck in debt, banks failed, and the mid-west was soon a dust bowl from over farming and reclaimed equipment. With the Smoot-Hawley

Causes of The Great Depression

1748 words - 7 pages .) Even when the prices were high, the Americans kept on investing on stock. The Federal Reserve Bank may have helped with the disaster of economic depression as it has inflated money supply during 1920’s. Then after the Federal Reserve was aware it warned its member banks not to lend money for speculative purposes. The stock market crashes Stock shares began to be sold in large quantities; everyone wanted to sell their stocks. People were

Causes of The Great Depression

3306 words - 13 pages The Great Depression was the worst economic slump ever in U.S.history, and one which spread to virtually all of the industrializedworld. The depression began in late 1929 and lasted for about adecade. Many factors played a role in bringing about the depression;however, the main cause for the Great Depression was the combinationof the greatly unequal distribution of wealth throughout the 1920's,and the extensive stock market speculation that took

The Causes of the Great Depression

1189 words - 5 pages the floor of the stock exchange. 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 have had. However, there is another way to look at the causes of

The Real Causes of the Depression

1313 words - 5 pages Statistics show right now in the United States the unemployment rate is high. A lot of people are saying that this is bad and the economy is slowly going downhill, but most people forget to think that these things are normal and is nothing worse than the Depression of the 1930s. Although some people say that the Depression was caused by the Smoot-Hawley Tariff Act, it was strictly due to many reasons that were unrelated to the Act. The Smoot

Exploring Causes of The Great Depression

746 words - 3 pages Exploring Causes of The Great Depression Introduction The Wall Street crash of 29 Oct 1929 and the Great Depression that followed were such a shock to most Americans that some early attempts to explain their causes blamed sunspot activity or medieval prophecy. A few held it to be divine retribution on a people who had indulged themselves in a decade of hedonism after World War I and were due for a sobering

Causes and Effects of the Great Depression

3996 words - 16 pages C:\MSOFFICE\WINWORD\TEMPLATE\NORMAL.DOTApril 2, 1997The Causes and Effects ofThe Great Depression In AmericaFew Americans in the first months of 1929 saw any reason to question the strength and stability of the nation's economy. Most agreed with their new president that the booming prosperity of the years just past would not only continue but increase, and that dramatic social progress would follow in its wake. "We in America today," Herbert

Similar Essays

The Causes Of Depression Essay

2020 words - 8 pages students, post partum depression, and treatment options for depression. Causes of Depression According to the Department of Health and Services, they say that depression can have many different causes. These causes can range from many different things family inheritance, biochemistry, environmental stressors, and other factors, can be involved when depression occurs. (Department, Depression: What Every Woman Should Know ) They also believe that

The Causes Of Adolescent Depression Essay

1407 words - 6 pages “According to Mental Health America, one in every five teens has clinical depression” (“Safe Teens”). Do you know someone who suffers from teenage depression, or maybe a friend or family member? Or maybe you, yourself, may suffer from teenage depression. Well you are not alone. Many teens in America, as well as the rest of the world, are affected by teenage depression. Depression is an effect for many teens, with many causes. As a result, there

Causes Of The Great Depression Essay

651 words - 3 pages economic depression started and lasted until the start of the Second World War. The three causes of the Great Depression are installment buying, uneven distribution of wealth and the irrational behavior in the stock market. Installment buying serves as the first cause of the Great Depression. In the 1920s, a large number of American families purchased automobiles, refrigerators, vacuum cleaners and similar household products on credit. Many

Causes Of The Great Depression Essay

932 words - 4 pages seemed to rise, when they started to drop people overreacted. A domino effect was created by people panicking and selling stock because it would lower the stock price even further (“Economics Essays: Causes of Great Depression.”). When banks started going under that is when it really created a problem. With the faults in the banking policies, chaos was just waiting to happen. If people heard a bank they had their money in was on the verge of