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The Great Depression Paper

The Great Depression was a time of total despair. Years of economic downturn not only affected the United States but may European countries as well. Americans endured lost of fortunes, homes, jobs and personal tragedies. Very few alive today remember what it was like, and to the rest of us, it is just a piece of history that we can only imagine. The Great Depression reeked havoc on the stock market, banking, industries, and agriculture that led to massive unemployment, breadlines and fear that lasted over a decade. After the stock market collapse, the New York banks became frightened and called in their loans to Germany and Austria.

However, without the American money, Germans had to stop paying reparations to France and Britain. This was a chain reaction and they could not repay their war loans to America, therefore, the depression had spread to Europe. The U. S. Government tried to protect domestic industries form foreign competition by imposing the Hanley-Smoot Tariff of 1930. In retaliation governments worldwide sought economic recovery by adopting restrictive autarkic policies and by experimenting with new plans for their internal economics. As a result, global industrial production declined by thirty-six percent between 1929 and 1932.

Worldwide trade dropped by an all time high of sixty-two percent. (Annals) The question of the day was, How did this happen? Mass speculation went on throughout the late 1920’s. In 1939 alone, record volumes of one-billion-one hundred twenty-four million-eight hundred thousand-four hundred and ten (1,124,800,410) shares were traded on the New York Stock Exchange. (Drewry) From early 1928 to September 1929 the Dow Jones Industrial Average rose from one hundred ninety one to three hundred eighty one. This sort of profit was irresistible to investors.

Company earnings became of little interest; as long as stock prices continued to rise large profits could be made. Through the practice of buying stocks on margin , one could buy stocks without the money to purchase them. Investors went wild for this idea drove the market to unheard of high levels. By mid 1929 the total outstanding brokers’ loan was over seven billion dollars and eight and a half billion dollars over the next three months. Interest rates for broker loans were going for as high as twenty percent in March 1929. (Drewery) This boom in the stock market was based on confidence in the economy.

In September prices started to dip downward. People were not that concerned and trading continued. Then on Monday, October twenty-first prices started to fall quickly. The volume was so great that the ticker fell behind; investors started to panic, knowing that prices were falling, but not by how much they started selling. This caused the collapse to happen much faster. A few bankers stepped in to try to stop the crash. But then on Monday the twenty-eighth prices started dropping again. On “Black Tuesday” sixteen and a quarter million shares changed hands and turmoil set in.

Stocks fell so much that there were no buyers at any price. Faced with this economic decline the exchange closed and people lost confidence in the banks. (Boardman) As depositors lost faith in the banking system over one billion dollars was taken out and hoarded. There was a run on the banks. Police were called in to help handle the crowds. All depositors who were able to get inside the bank before closing time got all of their money. The Emergency Banking Act closed all banks for four straight days, and put them under inspection by the national government.

Scharff) This brought about the creation of the Federal Deposit Insurance Corp. or FDIC. In case a bank folded the depositor would receive up to five thousand dollars per account; this was a guarantee from the government. These measures helped re-establish Americans faith in the banking system. Once the bank scare was over, they soon realized that other problems were still very prominent: unemployment and poverty of epic proportions. During the Great Depression farming was struck a brutal blow. Over production of crops, with and increase in prices led to a surplus of crops.

Some farmers banded together and for four days gave away their crops so they would not have to watch them rot. (20th) As if the economic disaster were not enough, the Midwest was hit with unprecedented drought. Food supplies were diminished as formally fertile fields dried up. Great clouds of dust and sand were carried by the wind covering everything and creating the term “Dust Bowl” . Millions of hectares of farmland became useless. Tenant farmers and their families had become homeless wanderers. Farmers that had worked their own land were also forced to evacuate. People in America were starving.

Something had to be done. Newly elected President Roosevelt was determined to turn the economy around at any cost. In 1933, Franklin Delano Roosevelt was elected to the presidency with the hopes of uplifting Americans form severe economic decline it was going through. Roosevelt was prepared with a plan to battle the depression with a set of “New Deals” . (Annals) His “hundred days” program helped pass new legislation to aid farmers, industrialist and workers. “His technique was, as he said, bold, persistent, experimentation Take a method and try it, if it fails admit it frankly and try another.

But above all try something. ” New Deal programs sought to stimulate demand and provide work and relief for the impoverished through increased government spending. British economist John Maynard Keynes backed up the theories behind the New Deal. In 1929 federal expenditures constituted only three percent of the GDP. Between 1933 and 1939 federal expenditures tripled. The New Deal helped prevent the economy and the banking system from going into free fall. The New Deal was both a program of national recovery and of reform.

Overall, FDR’s New Deal helped create programs that ended the Great Depression, although some argue that World War II ended the depression. FDR’s Programs were the main support and foundation for the increase in production of war goods. The Great Depression was a time of total despair that lasted over a decade, putting fear into the hearts of man. No one knew how they were going to pay their bills, or for how long they were going to keep their homes. Mothers feared how they were going to feed their children. Businessmen committed suicide when they could not stand to face being poor.

Fear was the main factor behind hoarding. People hoarded all sorts of dry goods so they would not have to do without when they could no longer buy them. Even after the depression was over, people still hoarded their favorite and most necessary goods. Many lived in fear that it could happen again. Case in point: My husband’s aunt was a young teenager during the depression, and many items were very hard to come by. Items such as toilet paper, soap, light bulbs, and butter were some of the most coveted of all. Because of the depression she would always make sure she would have plenty of these items on hand.

She lived to be 77 years old and she never married. When she passed away we found evidence of her fear. In her freezer we found twenty-four pounds of butter. In a giant walk in closet we found enough toilet paper and paper towels to last a family of five for over a year. Inside her linen closet there were 150 bars of soap and a few cases of light bulbs. I did not have to buy soap for three years or light bulbs for five years. I have spoken to others who have lived during the depression and to my surprise they all hoard some things to a degree. Those of us born after WW II can only imagine what it was like.

Maybe we should be a little more on the cautious side and take a good look at our own economy. We should take into account that it could happen again. The Great Depression was not the only depression or the longest, that title being held by the Long Depression of the late nineteenth century, nor was it the sharpest in contraction. The one after the first World War being a deeper drop, it represented the greatest fall from the general trend-line of growth. Are the signs there that we are headed for another downturn? Are we all a little to at ease with our economy? Maybe we should take a closer look.

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