The Great Depression (1929–1939) was a severe global economic downturn that affected many countries across the world. It became evident after a sharp decline in stock prices in the United States, leading to a period of economic depression. The economic contagion began around September 1929 and led to the Wall Street stock market crash of 24 October (Black Thursday). This crisis marked the start of a prolonged period of economic hardship characterized by high unemployment rates and widespread business failures.
Causes of the Great Depression
- Overproduction
- The “Roaring 20’s” was an era of great prosperity and economic growth
- 1929: Agriculture still makes up half of the US economy
- A surplus of goods in the market begins to drive prices down
- Failed Monetary System
- By 1929, the federal government decided to slow the rapid growth by increasing interest rates during a recession
- Raising interest rates means that it cost more to borrow and raises the price of existing debt
- By 1929, the federal government decided to slow the rapid growth by increasing interest rates during a recession
- Stock Market
- The value of stocks soared in the 1920’s as corporate profits rose, fueled by mass consumption (Fueled by credit)
- Black Tuesday, October 29th 1929
Hoover is blamed for the Great Depression
- Government shouldn’t play an active role in the economy
- Bankers/Business to follow policy of voluntary non-coercive cooperation where he gave tax breaks in return for private sector economic investment
- Hoover Moratorium: put a temporary stop to war debt and reparation payments
- Democrats in Congress passed a high tariff (Smoot-Hawley Tariff Act) to protect US industry (hoped to stimulate purchasing of US goods)