What’s the great depression
The Great Depression is the economic downturn that began around the world in 1929 and lasted until 1939, and was the longest and most severe depression in the industrialized Western world, leading to drastic changes in economic institutions, macroeconomic policy, and economic theory. Although it originated in the United States, the Great Depression caused sharp declines in production and severe unemployment in almost all countries of the world. Its social and cultural implications were no less surprising, especially in the United States, where the Great Depression is considered one of the most severe misfortunes Americans have faced since the Civil War.
What are the causes of the Great Depression?
Throughout the 1920s, the United States was rapidly expanding the economy and more than doubling the country’s total wealth, between 1920 and 1929, a period dubbed the Roaring Twenties.
The stock market centered on the New York Stock Exchange on Wall Street was the scene of reckless speculation, as wealthy businessmen, even chefs and doormen poured their savings into stocks, and the stock market expanded rapidly, culminating in August 1929.
By then production had fallen, unemployment had risen, and stock prices had remained well overvalued. In addition, wages were low, consumer debt was spreading, the agricultural sector of the economy was suffering from drought and low food prices, and banks had a surplus of large loans that could not be liquidated.
The American economy entered a mild recession during the summer of 1929, as consumer spending slowed and unsold goods began to pile up, which in turn slowed factory production, yet stock prices continued to rise. By the fall of that year, stock prices had reached levels too high to be justified by expected future earnings.
What are the effects of the Great Depression?
For many years, with one economic disease after another, American citizens were made very poor by few jobs and low wages. A severe drought hit the southern plains causing the famous dust bowl, causing many American farmers to suffer from several things, no longer arable land, in addition to being affected by tariffs and reduced trade.
Unemployment levels have risen to alarming levels, as wages for many workers were not high before the Great Depression, with banks unable to provide savings to individuals and businesses.
The Great Depression began with a rise in the unemployment rate, but this rate did not exceed at that time 10%, but when the depression reached its worst and most severe days, the unemployment rate increased dramatically, as it exceeded 20% in 1932, and by 1933 it was approximately 25%.
Unemployment did not reach a critical level in the remainder of the Depression, but the rate was still above 10% until the early 1940s when the United States entered World War II.
Confidence and faith in the American financial system were practically non-existent after the market crash affected the banks greatly, as many Americans began to withdraw their remaining money outside the banks, preferring to save it or buy gold with them instead. Bank accounts were withdrawn en masse, and the banks did not have the cash to cover all the withdrawals, and the result was billions of dollars that bank depositors could not compensate.
What led to the end of the Great Depression?
The country elected Franklin D. Roosevelt as president in 1932, promising to create federal government programs to end the Great Depression. Within 100 days he signed the New Deal and incorporated it into law, creating 42 new agencies designed to create new jobs and provide unemployment insurance. Many of these programs still exist, as they help protect the economy and prevent another future depression from occurring.
New Deal programs include Social Security, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation.
Many argue that it was World War II that ended the Depression rather than the New Deal, while still others claim that if Franklin Roosevelt had spent as much on the New Deal as he did during the war, he would have ended the Depression.