Causes of the Great Depression 3
Between the late 1890's, after the panic of 1893, and the late 1920's, the American people led good lives in which most prospered. In the 1920's the problems that led to the Great Depression were dispersed over a time of maldistribution of wealth, and what was called a bull market. A bull market is a stock market that is based on speculation. Speculation was a system of borrowing money to buy stocks and selling for a profit. Speculation only worked if the stock market was on the rise though. To this day people who have not been properly educated about the Great Depression believe that President Hoover was the cause. The idea that President Herbert Hoover caused the Depression could have arisen from the fact that he was the President at the time the Depression began. However, the people who do not believe that President Hoover was the cause deem the crash of the stock market in 1929 as the real culprit. The truth behind the stock market crash is that it was the event that caused the already unstable economy to go over the limit. If the president and the stock market crash did not cause the Great Depression, then what did? According to research done on the Great Depression, the causes rest on of different factors, but ca
The problem with the economy being based on certain industries, such as the automotive, was the same as having a great gap in income within the population. Some industries ran the nation and other industries were not thriving. The United States economy in the 1920's was partially dependent on new industries. If one of these new industries were to have a dilemma the whole economy would have a major problem. The economy in the 1920's was prospering greatly, but there was no diversity in industry. The trouble with the new industries was that they could not expand indefinitely, at some point everyone would have enough cars and radios. If these industries fell, the only other major industry that would be left is the agricultural industry, which was doing very poorly in the 1920's. The large gap growing between the United States citizens was creating a very unstable economy. According to economists who have studied the Great Depression, in order for the economy to operate appropriately the total demand must equal the total supply. Unfortunately in the twenties this equilibrium with supply and demand was not held; there was incredible excess in the amount of goods produced and unfortunately the price of goods was not dropping and the working class could not afford to buy them. The maldistribution wealth and income was one of the most profound causes of the Great Depression. The credit problem appeared as a result of the middle-class wanting to spend money on a luxurious living. The key for the middle-class to living a luxurious living was the magical word, credit. Credit was something anyone could have and with credit they could buy whatever they wanted and not have to worry about paying for it until a later time. The concept of buying now and paying later caught on quickly with the American people. At the end of 1920's, 60% of cars and 80% of radios were bought on credit (Gusmorino, Main Causes of the Great Depression). Between 1925 and 1929 the credit amount in the United States rose from $1.38 billion to $3 billion (Gusmorino, Main Causes of the Great Depression). The President could also be seen taking part in the whole credit trend. A Presidential committee, unidentified by the author, stated that credit was the, "telescope the future into the present," (None, Causes of the Great Depression). This notion of the "telescope to the future" meant that when the future was to come, there was little to buy that already had not been bought. This concept of credit was good for the time being, however, it made the time in which the people who could not originally buy these products even worse when they had to pay the credit companies. Furthermore, the wages of the working-class could not go to new products to buy, or sometimes in extreme cases food, because they had to pay for products that had already been previously purchased by credit. The real driving force behind the American economy in the 1920's was the automotive industry. By 1929 there were 21 million cars on the road, which was about one car per six people (None, Causes of the Great Depression). As stated earlier, other businesses were succeeding in this decade if they were connected to the automotive industry somehow. The first genre of companies whose success was connected to the automobiles was the steel companies, because they were the suppliers of the materials for the automobiles to be made with. As the automobile became a "closed car," meaning they had a roof and interior designs, the textile, glass and leather industries began to grow. Hotels began to spring up around the nation, because now people could get around faster and easier. The new type of hotel was the "motor hotel," or as we know as the motel. Externally the automotive industry helped the American economy, but it was slowly hurting the economy from the inside out. If the automotive industry were to fall apart, then all other companies that were making mass profits off of th
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Approximate Word count = 3325
Approximate Pages = 13 (250 words per page double spaced)
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