Because of the growing separation of the rich and the poor, credit allowed the poor to appear wealthier than they were. Spending went up about 50%, while incomes went up only 12%. This caused people to go into debt. Consumerism was a major factor in the cause of the Great Depression but not the only one. Another common cause of the Great Depression is the combination of overproduction and underconsumption.
Interest rates continued to rise in order to reduce inflation; this caused manufacturing and housing to weaken. The savings and loans industry suffered during this time. They experienced frequent account withdrawals, as depositors moved their money to higher-earning accounts offered by commercial banks. The savings and loans industry was already struggling, the recession only made it worse. High mortgage rates destroyed the value of mortgage-backed loans, which is the primary asset of the savings and loans association.
This law increased custom duties by nearly 50% on imports of more than 20,000 types of goods. Many countries, as a retaliatory measure, also increased their import taxes. As a result, world trade fell sharply, which contributed to exacerbating the Great Depression. With overproduction still occurring, this international standstill only made to intensify the already critical situation. The tariff also increased living costs, limit exports and hurt investors as the high tariffs would make it harder for debtors to pay off loans, continuing to weaken banks.
These things enabled investors who were close to banks to succeed and increase their wealthy. There were many people who believed that this would lead to a collapse in the economy for those with unequal privileges, and despite the large boom in the economy the first few years, there was the panic of 1819. Prices went sky-high, and high inflation only worsened the situation for many of the laborers. The first to blame was the Bank of the United States, which had stopped exchanging precious metals for banknotes. When it began to call its loans, people were unable to pay, leading to a devastating effect on the economy.
Deficit spending is the government spending more money than it takes in (Source F). In 1934, over $6.2 billion was spent on the New Deal (Oxford, 2016). In 1941, the deficit skyrocketed to $57.2 billion (Oxford, 2016). During the Great Depression, the national debt increased billions of dollars over the course of the decade. The main cause of deficit spending was all of the programs for the New Deal.
Today, this issue is due to many more reasons than the dust bowl ruining many things. Focusing on America, our population has grown insanely high since the “dirty thirties”. While population has risen, so have prices. The price on many, many products have gone up in the last decade, making people with a lower pay struggle with living. It’s crazy how many people are unemployed in the US right now and with people believing there will be an 80% stock market crash in 2016, things could only get worse.
The new consumer culture is what led to 16.5 million shares being sold in one day, which was detrimental to the stock market as it caused the crash on October 29, 1929. Many lost a great deal of money, marking the start of the Great Depression. The excessive consumer culture also led to a vast majority of prosperity going towards the industrial economy instead of the
This was a concern in both the industrial industry as well as in the agricultural industry. Farmers had been producing more food than the public was consuming since the First World War resulting in the farmers becoming debt-ridden by the mid-1920s. Land prices for farmers plummeted by 40% which led to high levels of unemployment across America by 1929. However, despite the fact that agriculture was struggling in America, industry was soaring in the years leading up to the Great Depression. In the so-called ‘boom’ period before the bust many people bought luxury products, such as cars, on credit.
With higher production costs and productivity at it maximum, companies cannot maintain profits by producing the same amounts of goods and services. As a consequence, the increased costs are passed on to customers, causing a rise in the overall price level (inflation). Demand-pull inflation occurs when there is an increase in collective demand, categorized by the four sections of the macro economy: governments, households, businesses and foreign buyers. When these four sectors at the same time want to purchase more output than suppliers can produce, buyers compete to acquire limited amounts of goods and services. Buyers then bid prices up, again and again, causing inflation.