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The notion that "history repeats itself" prompts a critical examination of the causes behind the Great Depression of the 1920s. Despite the exciting developments, inventions, and cultural changes characterizing the "Modern Era," economic realities, such as the Business Cycle, played a crucial role in propelling the nation towards a devastating recession. The abuse of debt, economic crashes, and the decline of the agricultural industry due to overproduction were pivotal factors in initiating the Great Depression.
The 1920s, often referred to as the "Roaring Twenties," witnessed revolutionary changes such as the first commercial radio broadcast, increased production efficiency, the rise of sports heroes, and the widespread adoption of credit.
The shift from a rural to an urban society brought newfound freedoms for women, more job opportunities for African Americans, and enhanced connectivity across the nation through trains, radio broadcasts, and print media.
However, as highlighted in the Background Essay of the DBQ, the excitement of these changes did not pause the relentless march of the economy and the Business Cycle.
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The euphoria of the stock market, the manipulative practices within, and the widespread abuse of credit all contributed to the economic downfall that marked the beginning of the Great Depression.
The stock market, a novel entity in the 1920s, captivated the urban lives of businessmen. Originating in Europe, stocks were initially created to raise capital for new and often unstable businesses. Americans, enticed by the prospect of wealth, quickly immersed themselves in the stock market.
While some experienced financial gains, the wealth gap widened, with the affluent receiving a disproportionate 33 percent of the national income, as illustrated in Document 9 of the DBQ.
However, the stock market frenzy was not without its perils. Document 2 emphasizes the prevailing sentiment that "anyone not only can be rich but ought to be rich," influencing a surge in stock investments. Public confidence became a significant player in the stock market, and as explained in the background essay, "Public confidence influences stock." Unfortunately, the stock market became a risky business, with speculation causing a disregard for the actual stability of the companies involved.
Speculation, as depicted in Document 5, led to an artificial inflation of stock values. The irresponsible use and abuse of the stock market contributed to the economic dip that eventually escalated into the Great Depression.
Moreover, manipulation further exacerbated the situation. The newfound and rapid wealth generated by the stock market created an image that resonated with the American dream — that everyone should aspire to be rich. As suggested in Document 2 of the DBQ, the notion that "anyone not only can be rich but ought to be rich" fueled the desire for wealth, intensifying the hype and leading more individuals to invest in stocks.
As highlighted in the Background Essay of the DBQ, "Public confidence influences stock," and the public fervently turned to stocks, placing significant weight on their fluctuations. This phenomenon is evident in the swift and widespread adoption of stock market activities, depicted in the newspaper article in Document 3. Even banks threw their support behind the stock market, attempting to navigate the volatile ups and downs.
Moreover, speculation, illustrated in Document 5, caused many Americans to focus solely on the "points" by which a company's stocks increased rather than evaluating the actual stability and reliability of the company itself. This artificial investment for quick profits, as detailed in A History of the American People (Document 5), became a prevalent and detrimental habit during the 1920s.
The consequences were profound. The stock market, though an exciting and innovative activity, became a risky business due to the irresponsible use and abuse of the market. This, in turn, significantly contributed to the economic downturn and the onset of the Great Depression.
Another significant contributor to the economic downturn was the newfound accessibility of credit. While it was revolutionary that Americans could make more efficient use of their money, the irresponsible use of credit emerged as a recurring problem. Credit allowed buyers to acquire goods beyond their immediate financial means, fostering a lavish and innovative lifestyle.
Document 10 of the DBQ suggests that in times past, individuals would cease buying when unable to afford an item. However, the credit system enabled continuous buying, leading to a looming financial burden for buyers. The installment plan, detailed in Document 6, became a prevalent method of purchasing, ultimately contributing to significant national debt.
Advertisements, as depicted in Document 8, convinced people to buy new and entertaining items, contradicting the reality illustrated in Document 9, where only 18 percent of Americans earned enough for a standard living. The abuse of credit by consumers added to the mounting U.S. debt, becoming a substantial factor in the onset of the Great Depression.
The consequences of these actions were profound and far-reaching, impacting individuals from all walks of life. As we reflect on this pivotal period in history, it serves as a stark reminder of the delicate balance required to sustain a thriving economy and the importance of responsible economic practices.
Lastly, overproduction of goods, particularly in the agricultural sector, played a pivotal role in the economic downfall. The Business Cycle, a series of economic expansions and contractions, indicated a pattern of depression following wars or challenging times, as evidenced in Document 1 of the DBQ. With World War I concluding, there was a looming risk of economic decline.
The overproduction of goods, especially by farmers, became a significant challenge. Despite demographic changes, many farmers continued steady production, leading to a surplus of crops that couldn't be sold. The law of supply and demand dictated that an excess supply would drive prices down, significantly impacting the economy, as illustrated in Document 4.
Farmers, unable to sell their surplus and facing economic hardship, contributed to the rising unemployment rates, as shown in the chart of Document 4. The collapse of the farm industry, depicted vividly in Document 11, symbolized the broader economic challenges that culminated in the Great Depression.
In retrospect, the Great Depression of the 1920s was a complex interplay of various factors, with overproduction, the collapse of the stock market, and the abuse of credit emerging as primary catalysts. The roaring excitement of the era blinded many to the economic realities, leading to a nationwide economic downturn.
The consequences of these actions were profound and far-reaching, impacting individuals from all walks of life. As we reflect on this pivotal period in history, it serves as a stark reminder of the delicate balance required to sustain a thriving economy and the importance of responsible economic practices.
The multifaceted causes of the Great Depression are lessons etched in history, urging future generations to approach economic prosperity with caution, responsibility, and a keen understanding of the intricate dynamics that govern the financial landscape.
As we navigate the complexities of our modern economy, the echoes of the Great Depression remind us that history is a relentless teacher, urging us to learn from the past to secure a more stable and equitable future.
Understanding the Causes of the Great Depression. (2016, May 08). Retrieved from https://studymoose.com/what-caused-the-great-depression-2-essay
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