What Were The Causes Of The Great Depression

893 Words4 Pages
People are led to believe that the Great Depression started with the stock market crash of October 1929, but that isn't true and it leads people to mistake correlation with cause. When one thinks of the Great Depression they think it began after the stock market crash, but not because of it. The underlying economic conditions in the U.S before the stock market crash weren't all "moonshine and rainbows"; The 19 twenties featured large scaled domestic consumption of relatively new consumer products, which was good for American industry. Much of this consumption was fueled by credit and installment buying, which as it turned out was very unsustainable. The thing about credit is that it works fine unless and until economic uncertainty…show more content…
other signs of economic weakness also appear throughout the decade, for instance, in 1925 the growth of car manufacturing slowed along with residential construction and Herbert Hoover labeled "an orgy of mad speculations" in the stock market that began in 1927. According to historian, David Kennedy, by 1929 commercial bankers were in the unusual positioning of loaning more money for stock market and real estate Investments then for commercial ventures. It is easy to see where one would think the stock market crash occurred only because of the depression, possibly because it turns American economic history into morality play, but the truth is that the stock market crash and depression were not the same thing. A lot of rich people lost money in the market, but what made the Great Depression the Great Depression was massive unemployment and accompanying hardships, and this didn't actually begin until around 1930 or…show more content…
But actually deflation is much worse. An example of this would be when prices drop, businesses would often cut cost, resorting in them usually laying off workers. These workers then wasn’t able to purchase anything so inventories continue to build up and prices dropped further. Banks then stop lending money, so this resulted in employers not being able to borrow money to make payroll to pay their workers, which caused more and more businesses to go bankrupt, leaving more and more workers unable to purchase the goods and services that would usually keep the business open. One is also able to blame Andrew Jackson because it was his distrust in central banking that caused this one big mess. Some might think it's too simple, but the federal reserve does deserve a good amount of the blame for not rescuing the banks and not including money into the economy to fight this deflationary
Open Document