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The Great Depression was the worst and longest period of high unemployment and low business activities that has ever occurred. During an economic depression, factories dismiss laborers, stores close, and small businesses and farms fall into ruin. The United States has experienced short periods of depression followed by periods of prosperity, but the Great depression of the 1930 s was a 10 -year long nightmare. (The Great Depression, Pg. 3) Usually the roots of the Great Depression are traced back to the New York Stock Exchange, and the year 1929. At the stock exchange private individuals, banks, and businesses are allowed to buy and sell shares of corporations. The higher the stocks rose in value the more investors thought it was a good buy This meant they would buy even more shares of the stock. As this kept continuing, the share prices were way above the real value in terms of the dividends they might produce.
In 1928, a common share of Du Pont stock increased from 310 $ to 525 $ in one year. Montgomery Ward stock jumped from 117 $ to 440 $. But by 1928 while the prices were soaring, demand for manufactured goods was falling off, and just when shares were climbing most rapidly it seemed like the time for a crash. In September of 1929, investors began to grow uneasy and a selling frenzy began.
As they kept selling there shares, the prices kept tumbling. These prices kept falling because the government would not intervene based on their Laissez Fair Policy. Things were going worse by the day. One day came where people sold their stocks more furiously than ever before. It was October 24, 1929, more commonly known as Black Thursday. (The Great Depression, Pg. 3) Black Thursday was described as a day where Fear struck the big investors and the little ones thousands of them threw their holdings into the whirling stock exchange for whatever money they could bring. (New York Times, October 25, 1929, Pg. 1) In this one day, investors saw several years profits vanish.
The White Sewing Machine Company had reached 48 $ a share, but by the end of Black Thursday a broker offered it for a dollar a share with no takers. American Telephone and Telegraph fell 28 $, and Allied Chemical fell 35 $. October 24, 1929 was a day of commotion and hysteria on the streets, people stood outside Wall Street like zombies awaiting the results. (The Great Depression, Pg. 8) As people began to feel as though the worse was over, another terrible day came upon them. Black Tuesday came 5 days after Black Thursday.
This time, so many shares were sold that the market collapsed completely. These Black Days were a blow from which the business community could not recover. They indicated the beginning of the economic crisis which scarred millions. (The Great Depression, Pg. 8) Another major cause of the depression was over-production. Manufacturers were producing products at a much faster rate then which they could sell them. Also, people where struggling to pay for their living expenses and didnt always have the extra money to afford a new item from the store.
Others were already in debt for their house and other things which made it even more impossible to afford other goods. (Causes and Consequences of the Great Depression, Pg. 31) After the Stock Market crash in October, people were immediately affected. Even those who did not invest in the stock market. Most of the poor people and the middle class, kept their savings in banks. Many of these banks invested their deposited funds in the stock market. When the market crashed, the banks had nothing to give their clients. Approximately 1, 350 banks went broke in 1930, and 2, 300 more failed in 1931.
Millions of workers, nationwide, lost the savings they had scraped together over a lifetime. Just when things seemed to be at their worst the depression became even more terrible. A cycle had begun: Factory Owners who lost money in the stock market or through bank failures could not pay their workers and were forced to dismiss them. The laid off workers could not afford to shop in stores, so store owners ordered fewer goods, and had to lay-off clerks, and because fewer goods were being ordered from manufacturers, the manufacturers had to lay-off there workers and produce less. This downward spiral of unemployment continued and was reflected in the figures of National Unemployment. In 1925 only 3 % of the nations workers were unemployed.
By 1930 that figure had jumped to 9 % and by late 1932 it reached 25 %. This left about 13 million people facing the problem of how to feed their families with no paycheck coming in. Human suffering just kept increasing. Families who couldnt afford to pay their rent or make their mortgage payments were thrown out of their homes. Farms seized by banks for non-payment of loans were auctioned off to the highest bidder.
People were homeless and had reached the complete poverty line. Businessman who had flaunted luxurious limousines and large houses become broke. A 1929 cartoon from Judge magazine (shown below) shows the once-wealthy stockbrokers, that lost everything in the Wall Street crash, in a club given an option on how they planned to kill themselves The cartoon shows the seriousness of the depression because it got to the point people were willing to take their own lives to escape it. Ordinary families had to sell their home if they could and move to the street.
When the crash of 1929 occurred it surprised many people, even though the number of warnings that a depression was near was great. One warning was seen in the summer of 1929. Professional brokers had noticed ripples of uncertainty in the stock market, but they failed to check up on the reasons why. Had they checked into this, a few warnings that a depression was near. Also, people could have seen that the boom of the 1920 s was not so evenly distributed.
The heavy industries that had launched the United States prosperity in the previous century (coal, iron, steel, shipbuilding, cotton and agriculture) had lagged behind. Other warnings include the Wage increase from 1, 308 dollars a year, to 1, 716 dollars a year, despite the fact that the national income was being distributed even more unevenly then before, and taxes on incomes over 1, 000, 000 $ were cut from 600, 000 $ to 200, 000 $ between 1924 and 1928. One of the biggest clues was that most working class Americans couldnt afford many of the consumer goods on the shelves. But a very obvious warning that was ignored was debt. Many middle class families, lured by smart advertising, were heavily in debt. Consumer credit was out of control.
As the stock market appeared to offer easy income gains, Americans bought and sold shares rather then making investments. This lack of secure investment and increased Speculation on the stock market further reduced the spending power of those who might have been able to have bought the surplus goods. But instead, the factories kept producing, the banks kept lending, and it was certain that a crash would occur sometime. The question asked when the depression is discussed is If all these warnings were visible, why wasnt a depression avoided? The problem was the politicians, were first off unprepared to help due to their lack of experience with such a collapse. Also, the era reflected a Laissez Fair (hands-off the economy) policy.
Hoover stuck to the policy throughout the beginning of the depression because he felt it was not the governments right to help and that individual citizens, firms and corporations could sort things out for themselves, just as they had been doing since the war. Also, if the government had helped, the traditional wisdom of the 1930 s said that if a government borrowed during a recession (to stir up economic activity) it would make things worse, and therefore the government would make cuts before theyd support spending. The depression was so terrible that it taught the United States an important lesson that it would never forget: The way out of a slump of falling prices and productions is for the government to borrow money and to spend it within the nation to stir up economic activity. As Roosevelt stepped into office. He brought about a lot of new ideas on how to prevent a depression from occurring again. The first problem he looked at was at the banks.
He knew he had to restore the peoples faith in the banks in order to help things move along. In order to do this he had a fireside chat (radio broadcast) and stated The federal reserve will transfer currency to all reopened banks and keeping your money in a reopened bank is much safer then hiding it under your mattress. (Roosevelt Fireside Chat) The Great Depression was a time of economic collapse. It was the worst and longest period of high unemployment and low business activities that has ever occurred. The numbers given have proved this as well as the stories of the poor, and the rich who lost it all during this horrible time.
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Research essay sample on Dollars A Year Couldnt Afford