What Caused the Great Depression Essay
What Caused the Great Depression
As followed by many, if the notion of ” History Repeats itself,”ls true, then the cause of the great Depression of the 1920’s needs to be analyzed. The 1920’s or the “Modern Era” was full of exciting times, new inventions, creations, and entertainment. However, as explained in the Background Essay of the DBQ, the economy does not pause for these exciting events to happen, and neither does the bussiness cyle. With the Bussiness Cycle already driving the nation towards recession, many habits of Americans jump started the Depression. The abuse of debt, crash of the economy, and downfall of industry of farmers and overproduction, brought the depression to a start.
The roaring twenties, was extravagent, and represented extreeme revolutionary charge. Some changes included, the first commercial radio broadcast, quicker production of goods, athelets and heros, and the most favored: credit. The change from the rural society, to a more urban nation, was embraced by many. This was the first experience of change for many americans, including freedoms and pride for women, more jobs for blacks, and the connection of the whole nation, through trains, radio broadcast, and newspapers/magazines. This was new to Americans, and proven by the depression that occured shortly after, it was a new experience for Americans, that they did not handle well, but moreso learned from it.
The Great Depression certaintly did not just occur a day, but had many events that built up to it. The stock market, used and depended on by many today, was new in the 1920’s, and a real thrill in the now urban lives of bussiness men. Stocks originated in Europe, created to raise capital of a new business that wasn’t exactly stable yet. A few options in the stock market, were to invest in a joint stock company, which meant selling ownership shares to those willing to invest in a new company. When a stock buyer does not hold on to their stocks, they sold them, or secondary stock. These account for most of the buying and selling of stock. Americans were fascinated in the stock market, and quickly invested. With some stocks bringing money into Americans, the wealthy class increased, and were soon recieving 33 percent of the national income, shown by he chart of document 9.
Unfortunatley also explained by the document, not all of the nation was that wealty, in fact only 18 percent were making the basic amount needed to meet basic standard of living, which was around 2000 dollars. One major problem of the stock market, was the fact that a stock could be doing well one week, but in short span of time, the stock could drop down, thus causing the investor to loose his money. Although the stock market was an exciting and new activity during the 20’s there were stil many that were struggling, maybe blinded by the excitment, they did not realized it. The economy did not stop, and the bussiness cyle was still intact. The many below the poverty line, wer bringing down the economy, perhaps blinded or addicted to the new and easy stock market.
An additional problem of the stock market, came from manipulation that Americans brought into the market. The new and at times quick wealth, that the stock market brought to many families, created a image that everybody wanted. Doc 2 of the DBQ for example, explains how this passage describes that a man suggest to the American people that “Anyone not only can be rich but out to be rich.” This influenced people to work to be rich, increasing hype and sending more people to invest in stocks. As explained in the background essay of the DBQ, ” Public confidence influences stock.” The public quicly turned to the stocks, putting more weight on stocks rising and falling each week.
Speculation, when stocks go up simpy because buyers believe they will be able to sell their stock for more in the future, caused many americans to only focus on the “points” that the company increased, and not the actual company. This artificial investment for a quick buck, (explained in doc 5 of the DBQ), was a bad habbit many in the 20’s abused. The Document, coming from A History of the American People, gave insite on what the market looked like many years ago. Also, displayed by the newspaper article in document 3, banks were supporting the stock market because of the rocky ups and downs. The stock market is a risky bussiness, but the irresponsible use and abuse of the market caused the economy to dip and thus contributed to the Great Depression.
On another note, it was fascinating and new that Americans could be more useful with their money, but the irresponsible uses of it , was a reoccuring
problem during the 20’s. Credit, a new variable, allowed buyers to buy goods that they did not have the money for at the time, or in general could not afford. The fabulous and inovated life that many were now living was fun, but eventually the money that buyers put on credit, would have to be paid off. Not all Americans were non chalant about the new credit. A passage from “If Hoover Fails,” (Doc 10 of the DBQ) describes how in old times, when one could no longer afford an item, they would stop their buying. The credit system however, allowed many to keep buying. Elmer Davis,suspected that the bill that the buyers would have to face later on, would be larger then they would be able to financially handle.
Debt was no longer shameful in the U.S. Explained in Doc 6, consumers were buying most of their belongings with a installement plan, which in the end, put the U.S in a big hole. Also supported by Document 8 of DBQ, the advertisments that were used to convince people to buy things that were new and entertaining, contradicts with the chart of Doc 9, which shows that only 18 percent of Americans were making enough money for standard living, which means that many Americans were buying new things they did not need, or could not afford. That’s were credit comes it, consumers could now buy things and pay it off later. The credit system was abused by consumers causing great U.S debt and contributed to the Great Depression
Lastly, but equally important, overproduction of goods contributed to the downfall of the economy. The bussiness cycle: A cycle or series of cycles of economic expansion and contraction, took a role in the prosperity of the economy of the 20s. According to document 1 in the DBQ: a pattern of downfall of depression was documented to come after most wars or tough times. With World War 1 just ending, there was a possibility that the economy would fall again. The overproduction of goods mainly came from farmers. Although the demographics of the 20s had greatly changed, many farmers were still steady in productions and maintaining their farms. Unfortunately in the times coming up to the Great Depression, farmers had overproduced goods, and weren’t able to sell the crops. Farmers couldn’t pay their bills, and the sales of farmers went down.
According to the rule of supply and demand, when there is a higher supply of a product, the prices is likely to go up, so the producer can get rid of the product. This made the value of goods go down, thus effecting the economy greatly. Displayed by the chart in document 4, the percent of farmers that were unemployed (particularly around the time building up to the Great Depression) spiked up. Because of the drop in prices, and overproduction, especially portrayed in a picture in Doc 11, the farm industry came stumbling down, just as the farmer and his prices in the photo.
Unless one lived in the time of the roaring and exciting 1920’s, its hard to really know what the times really felt like, and more importantly, what really lead to the Great Depression. Based of research, and history a few causes were particullary evident in being a main variables in the fall of the U.S economy. The overproduction of goods, the fall of the stock market, and the abuse of credit have the greatest impact on the fall. The Great Depression is a memorable period of time, and these 3 things led the nation to a depression.