The Great Depression
The Great Depression was the world economic recession that began in 1929 and lasted until around 1939. It was the largest and most severe dejection anywhere in the western industrialized world, initiating basic changes in monetary organizations, the macroeconomic approach and financial assumptions. Despite the fact that it began in the United States, the Great Depression caused extraordinary declines in performance, extreme unemployment and intense flattening in virtually every nation in the world. Its social and social impacts were no less impressive, particularly in the United States, where the Great Depression spoke of the hardest hardship confronted by Americans since the Civil War.
The fall of the money markets of October 1929 marked the beginning of the Great Depression. In 1933, unemployment was at 25 percent and more than 5,000 banks had left the business. Prices fell 10 percent each year. Panicked government leaders approved the Tarrif Smooth-Hawley to protect national industries and jobs.
Money markets crash of October 1929 flagged the start of the Great Depression. By 1933, joblessness was at 25 percent and more than 5,000 banks had left business. Prices fell 10 percent each year. Panicked government leaders passed the Smooth-Hawley Tarrif to protect domestic industries and jobs.
Life During The Great Depression
The Depression caused many farmers to lose their farms. At the same time, years of overcultivation and a drought created the “Dust Bowl” in the Midwest. He finished farming in a previously fertile region. Thousands of these farmers and other unemployed workers sought work in California. Many ended up living as homeless “vagabonds”. Others moved to marginal neighborhoods called “Hoovervilles”, which bears the name of then President Herbert Hoover.
Although President Herbert Hoover tried to boost the growth of the economy through measures such as the Financial Corporation of Reconstruction, these measures did little to solve the crisis.
Franklin Roosevelt was elected president in November 1932. Opened as president in March 1933, Roosevelt’s New Deal offered a new approach to the Great Depression.
The Stock Market Crash of 1929
The value of the US stock market almost doubled in a frenzy of speculative buying in the eighteen months before the crash began on “Black Thursday” on October 24, 1929. That day, and the “Black Tuesday,” the 29 In October, there was a panic attack in millions of shares sold at prices in constant decline.
The fall of October 1929 was only the beginning of the collapse of the market. By mid-November, the stock market had lost a third of its September value, and in 1932, when the market bottomed out, stocks had lost ninety percent of their value. A US Steel stock that had been sold for $ 262 before the accident was sold in 1932 for $ 22.
The fall of the stock market signaled the beginning of the Great Depression, but it was only one factor among many of the main causes of the Depression. A weak banking system, a further collapse in agricultural prices already low, and industrial overproduction contributed to the economic slowdown. The disastrous Hawley-Smoot Tariff of 1930 (which raised average tariff rates to almost 60 percent) caused US international business partners to retaliate by raising rates on goods manufactured in the United States. The result was a contraction in international trade and a further decline in world economies.
According to Ben Barnanke, the former president of the Federal Reserve, the central bank helped create the Depression.
He used strict monetary policies when he should have done the opposite. Bernanke highlighted his five critical mistakes.
- The Fed began increasing the federal funds rate in the spring of 1928. It continued to increase it through a recession that began in August 1929. That was what caused the stock market crash in October 1929.
- When the stock market collapsed, investors turned to the currency markets. At that time, the gold standard supported the value of the dollars maintained by the US government. UU Speculators began trading in dollars for gold in September 1931. That created a race on the dollar.
- The Fed raised interest rates again to preserve the value of the dollar. That further restricted the availability of money for companies. More bankruptcies followed.
- The Fed did not increase the money supply to combat deflation.
- The investors withdrew all their deposits from the banks. The failure of the banks created more panic. The Fed ignored the difficult situation of the banks. This situation destroyed the remaining trust of consumers in financial institutions. Most people withdrew their cash and put it under their mattresses. That further decreased the money supply.
The Fed did not put enough money into circulation for the economy to work again.
In contrast, the Fed allowed total supply of U.S. dollars to fall 30 percent.
What Ended the Great Depression of 1929?
In 1932, the country elected Franklin D. Roosevelt as president. He promised to create federal government programs to end the Great Depression. In 100 days, he signed the New Deal in the law. Created 42 new agencies. They were designed to create jobs, allow unionization and provide unemployment insurance. Many of these programs still exist. They include social security, the Securities
and Exchange Commission and the Federal Deposit Insurance Corporation. These programs help safeguard the economy and prevent another depression.
Many argue that World War II, not the New Deal, ended with the Depression. But if FDR had spent as much on the New Deal as it did during the War, the Depression would have ended.
In the nine years between the launch of the New Deal and the attack on Pearl Harbor, FDR increased the debt by $ 3 billion. In 1942, defense expenditures added $ 23 billion to the debt. In 1943, he added another $ 64 billion.
In fact, World War II had its roots in the Depression. Financial stress caused the Germans to despair of choosing Adolf Hitler’s Nazi party to the majority in 1933. If FDR had spent enough on the New Deal to end the Depression before Hitler ascended to power, World War II It could never have happened.