The great depression, whose cause was the fall of the stock market in 1929, which created panic among individuals, investors, and the financial institutions which by 1932, had spread widely. Many people were greatly affected by the depression including consumers, investors, and even the regular workforces.
What is the Great Depression?
This was an austere international monetary depression and introduction of it begins in USA mainly in 1930s. Dates fluctuate among the states, in some nations it began in 1928, through 1929 and continued till the 1930s. The great depression occurrence began in the USA following a significant drop in stock costs which become global newsflash with the stock market boom generally known as the black market in the 20s, interest rates too low levels but the continued hesitancy of individuals to borrow and the impending depreciation meant that consumer assets and spending were low. During the great depression, everything was falling apart, and nobody expected to face this reality.
The great depression broke at a time when the United Kingdom was still yet to recover from the long effects of the First World War which is a decade earlier. That was when the global GDP fell by an expected 15%, and even though some economies started to regain in the 20s, research shows that it still has a negative effect long till the beginning of world war 11 in many countries.
The great depression effect in most countries is not limited to the only decline in stock prices but also modest particular tax, profit and price fell, and as a matter of facts, international trade listed by more than 50%, and redundancy rate increased to 25% and increased excessive to 33% in particular states during the great depression.
A lot of publications about the great depression have been written in different formats. One of such is a novel published in 1939 with the title ‘The Grapes of Wrath’ by John Steinbeck. This publication will show how was seen the economy and the society needs during the great depression.
Causes of the Great Depression?
The cause of the Great Depression was a topic of discussion among several gatherings. Though it was widely accepted that the great depression occurred primarily as a result of the fall of stock price, there are situations which triggered the fall of stock price. Ben Bernanke, the past chairman of the Federal Reserve, he held the thesis that the central bank was the architect of the great depression due to some perilous slip-ups. We want to outline five causes of the Great Depression, which can be seen also as a real example of the past reality.
- It started when the central bank raised the Federal Reserve capitals amount in 1928. It maintained till the beginning of the decline which happened in August 1992.
- When gold standards reinforced the worth of dollars held by the U.S administration, investors, during the great depression, switched to the circulation markets as soon as the stock market collapsed which make speculators to initiate trading for their dollars for gold in September 1931 which as a result, shaped a run on the dollar.
- This made the federal bank raised the interest rates again to keep the dollar’s rate which further constrained the accessibility of cash for companies. As a result, insolvencies start occurring frequently. Money for teens was no longer an option, and the adults were already filled with debts.
- Instead of the federal bank to circulate money to increase the quantity of money and combat deflation but they didn’t.
- This prompt investor withdrew all their deposits from banks as the situation destroyed any of customer’s confidence in financial institutions which further decreased the money supply. And as a result, the central bank allows the total supply of U.S dollar fall by 30%.
As a matter of facts, many economists have argued that, even if during the great depression many factors have changed the progress of this process, the sharp deterioration in international trade was after 1930 which also helped to worsen the situation, most especially for countries who are overly dependent on foreign trade. Though international trade was a small part of the whole economic activity in the U.S, who concentrated on much mediocre business like farming, foreign trade happens to be a much more significant factor in many other countries.
How the Great Depression was eliminated
As a conclusion, we can say that most countries started recovering from it in 1933. However, the United States found it difficult to return to the 1929 GNP for over a decade and their unemployment rate not less than 15% IN 1940 albeit a high decrease from the high rate of 25% in 1933.
In 1932, U.S opt for a new era that will bring great depression to an end instead of a short-term solution. A new president, Franklin D. Roosevelt was elected, and he promised to create federal programs to stop the great depression. The new president approached the situation with a brighter solution and within the next few days. Over twenty-five percent of the workforce was unemployed when he was elected, and he reopened the banks all over the nation – this information hold the front pages’ title.
He fulfilled his promise by signing the new agreement into law and produced 42 new agencies. The new deals gave to the poor people the help and stability they needed, including money for teens. These agencies were intended to deliver unemployment insurance, allow unionization and create jobs. Many of these plans involved the Securities and Exchange Commission, The Federal Deposit Insurance Corporation, and social security. These programs which still exist till today support safeguard the economy and serve as a preventive measure against another depression.
