October 1929 was the worst day in US history. It lasted ten years and brought down the whole economy. The whole economy was affected by this, including hunger and unemployment. The US economy enjoyed a period of great innovation, technological innovation and a changing lifestyle before the Great Depression. There was boom in the economy and prosperity.
The Wall Street crash wiped out millions and displaced them all. The next few years saw a drop in consumer spending, investments and employment. Inflation also dropped and companies were forced to lay off employees. The depression was at its peak in 1933. Main Causes of Great Depression
Stock Market Crash: On October 29, 1929, Wall Street in New York collapsed so severely that investors’ shares exploded into the air. The New York Stock Exchange saw nearly 16,000,000 shares traded in one day. Investors lost millions of dollars as a result. The total amount of currency in circulation was greater than the amount of money borrowed. To pay the loan, the owner of the shares had to sell them if stock prices fell below the amount borrowed money. As a result, prices began to drop more and the stock market crashed.
Bank failures: More than 9000 banks collapsed between 1930 and 1940. Uninsured bank deposits led to people losing their savings and banks failing. Due to uncertainty about the economic environment, banks that survived stopped making loans were less willing to do so. This resulted in a decline in spending.
All classes experienced a decline in their purchasing power: Individuals from all walks of life stopped buying items after the stock market crash. This resulted to a reduction and decrease in production. People lost their job. They could not pay the bills for the goods they had purchased. As inventory accumulated, it became more difficult to sell. The unemployment rate grew to 25 percent.
American Economic Policy: In 1930, due to the failure of businesses, the Government established the Smoot-Hawley Tariff to support domestic producers. Imports became less competitive due to this tax. This caused the loss of foreign exchange to be at its lowest point.
Drought Conditions: Although the Great Depression was not directly caused by drought, the Mississippi Valley’s 1930 drought was so severe that farmers could not pay their taxes or owe any debts. Instead they were forced to sell their farms and make no profit. This region was nicknamed “The Dust Bowl”.
Steps to Overcome Great Depression Franklin Roosevelt was elected President in 1933. His inaugural address was delivered on March 4, 1993 at Washington’s Capitol Plaza. “First ofall,” he said, “let us assert our firm belief that the sole thing we need to fear” and promised that he would quickly respond to the “dark reality of the moment.” Many people felt confident that their new president was bold enough to address the nation’s problems. The president announced a four-day bank holidays to prohibit people from withdrawing funds from insolvent banks. Roosevelt’s Emergency Banking Act (reorganization of banks, closure of insolvent banks) was approved by Congress on March 9. Three days later in his first “fireside conversation”, the president exhorted Americans to save their money and return them to banks. By the end, nearly three quarters were open again.
Roosevelt decided to implement a new series of social and economic policies in response to the Great Depression. The Works Progress Administration (WPA), which was the main relief agency under the second New Deal, was designed to provide work and not welfare. The WPA allowed the construction of roads, schools, buildings, and airports. Federal Theater Project was home to actors, painters as well musicians and writers. The National Youth Administration provided part-time work for students, set up training programs, and offered assistance to youth who were unemployed. Although only three million were jobless in the WPA, it helped 9 million people before it was abandoned by the government in 1943.
