The Great Depression was the events in American history between 1929 and 1938 in which the stock market crashed, banks failed, and unemployment rate was the highest it has ever been in the nation’s history. This paper will discuss the causes of the Great Depression, how it affected the lives of people in America, and what the government did to try to pull America out of the Great Depression.
The year 1929 started off with republican Herbert Hoover becoming president replacing Calvin Coolidge who had previously served as president between 1923 and 1929.
President Hoover believed in laissez-faire policies and thought that if the market economy was free, capitalism would be able to fix an economic downturn. Based on his economic beliefs, Hoover had lowered the top income tax rate to 24 percent from the previous 25 percent rate, while this may not have been enough to spark the depression, it did little to facilitate the major economic growth that had occurred during the 1920s.
On October 24th, 1929, a day now known as “Black Thursday”, Stock prices fell 11 percent and throughout the week leading up until October 29th the stock market had fallen a total of 17 percent.
A month later the stock market begun to trade sideways, a period when investments are within a tight range and don’t get high, between the crashes the week before and the sideways market, investors began to lose faith in the stock market and started selling stocks and pulling money out of the banks which caused wide spread panic. In 1929 there were a total of 650 bank failures, these failures caused the money supply to reduce and made each dollar worth more.
With the rise in the value of the dollar, prices fell which reduced revenue for businesses and increased the amount of debt that lenders had to pay back. This caused not only business to file for bankruptcy, but also caused personal bankruptcy across the nation.
In 1930 families in America started to feel the effects of the Great Depression, with businesses failing and the unemployment rate steadily rising, most people found it already difficult to feed themselves and their families. Although times were tough for many people in America, no one had it worse than the farmers along the Mississippi River up to the mid-Atlantic where the worst drought in 300 years, known as the Dust Bowl, would cause massive crop failure. President Hoover felt as though he had to help the people affected by this drought and signed the Smoot-Hawley Tariff Act. The Smoot-Hawley Tariffs raised taxes on 900 imports, the idea behind the tariffs was to support the farmers affected by the Dust Bowl, but instead of helping farmers and citizens, it caused food prices to increase in a nation that was already suffering.