Major Causes of the Great Depression

Introduction

It all began, October 29th, 1929, the Stock Market come to a seizing halt and crisis began. America’s economy was sustaining itself on money that wasn’t there from the stock market and it finally broke them to the point, at what the time felt like, of no return. The Great Depression swept the country and very soon people started to lose everything. Margins, people not buying American goods, and overproduction were some of the major contributions to the Great Depression.

Body Paragraph

The Stock Market Crash was majorly caused by people buying margins. Margins are when investors would pay only a fraction of the price to have a stock. People would use these to make quick money without having to commit to spending large sums of their savings upfront. The problem with this is that margin buyers were incredibly sensitive to any declines considering they would have to pay back all the additional money that wasn’t paid upfront.

(Document 4) Because of this, any slight decline, investors would drop the stock all together and essentially lose nothing. Then, the cycle would start all over again and the economy in reality would lose money. There was no way of checking this, so investors could drop as many stocks into the market again as many times as they’d like without any repercussions. (Document 4) The economy began to lose more than what was coming in slowly milking out the rest of money in the stock. The economy was sitting on a pile of, what essentially was, imaginary money.

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Since the economy began decreasing, companies began to lay off workers. These workers couldn’t buy products anymore. The increase of job loses made it harder for families to reach the bare minimum to support their family. Workers weren’t made and families suffered more everyday because they couldn’t make up the lost of money. During this time, 21% of families less than $1,000 as an income which is not nearly enough for an average family, which needed at minimum $2,000 yearly income. (Document 2) Since Americans could no longer afford to buy products, the government attempted to stimulate the economy by asking countries to repay war debt from World War One by buying American goods. However, in 1930 America adopted the Hawley-Smoot Tariff, which raised tariff prices tremendously. (Document 5) Evidently, other countries did not like this and stopped American products and in return raised their tariff prices in retaliation. Now Americans couldn’t afford foreign and domestic goods.

If America wasn’t already struggling, industries began making too many products and nobody was buying. Buying installment plans, purchasing something over a period of time, was incredibly popular. In theory, this seems like a great idea, however people were buying installment plans faster than the income was expanding. meaning that nobody was buying new products and prices dropped and the economy dropped. (Document 1) The economy wasn’t the only thing suffering from prices drop, but farmers were struck hard from it as well. The farm industry was over producing products and nobody was buying anymore, which force them to drop prices so low farmers weren’t making a profit anymore. (Document 3) Farmers lost so much money on dropped prices, and were hit the hardest during the depression. People couldn’t afford the goods farmers made and they were stuck paying off the installment plans, so buying new products was the least of their concerns.

Conclusion

The Great Depression was an awful time in American history and the major contributors to the suffering were: margins, people not buying American goods, and overproduction. The greatest decline in the American economy could’ve been avoided if the U.S. government monitored the stock market better, had not raised tariffs, and had support systems for overproduction. Also, the lack of preparation and the stall of government help is what made it harder for the economy to recover. Not monitoring the economy better was a mistake that caused major downfalls and could have left America in ruins.

Cite this page

Major Causes of the Great Depression. (2021, Apr 26). Retrieved from http://studymoose.com/major-causes-of-the-great-depression-essay

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