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| Black friday - American Depression:AGAIN ? |
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| Freaky Ideas - Information Sake | |||
| Written by Steve | |||
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A number of factors conspired to take the United States economy into a terrible depression in the 1930’s. The actual reason for the depression was a general loss of confidence in the American economy. The reason it got so bad was a general misunderstanding of recessions by American policy-makers of the time. The U.S. economy was booming in the 1920’s. Stocks were regularly bought on margin and their value kept soaring. All investments fared well. The reason is cyclical—one stock looks good so I buy it. That makes the price rise and you see that this stock is performing well, so you buy it and the price rises more. This was happening across the entire market. People were buying thousands and tens of thousands of shares of stock for as little as 10% down. Unfortunately, that house of cards eventually tumbled and people lost ten times as much as they put in. What caused the Great Depression, the worst economic depression in US history? It was not just one factor, but instead a combination of domestic and worldwide conditions that led to the Great Depression Stock Market Crash of 1929 Many believe erroneously that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Bank Failures Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings Reduction in Purchasing Across the Board With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce Drought Conditions While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves
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