Causes of the Depression
Cures
Life During the Great Depression
A Timeline of Great Depression Events
Causes of the Depression
October 24, 1929, will be immortalized in history books and the discussions in ecenomic classrooms forever. One single day shaped the following decade in ways that will be remembered forever. The one event touched everyone. Rich or poor. Powerful or weak.
Signs that pointed to a huge stock market crash were quite evident through out the twenties...but no one cared. It was clear that after the huge boom of the twenties that the prices of stocks would eventually have to drop. No one wanted to be a pessimist though. With the world rebuilding from World War I, businesses were making money and people were having a good time. The roaring twenties were fun... and shaky.
With the stock market as high as it was, people were eager to go out and buy shares of their favorite company. That alone did not lead to economic unstability. What made the market so unstable was how the stocks were purchased. Instead of using the money they had to buy shares, people would instead buy stocks on margin, meaning they would put ten percent down and pay the rest with credit. It seemed like it was impossible to lose, but economists were worried.
And then, of course, there was the crash. In March of 1929 the market began to take small dip with strang recoveries. On September 3 in was apparent that it was a bear market. From there everything went down, until the final crash on October 24, striking the public with panic.
Hoarding Money
While hoarding money cannot cause a recession by itself, it can cause problems. If the country has a gold standard, hoarding decreases the amount of money circulating. That is not a problem only if prices and wages drop instantly. When prices and wages do not drop, or when they take quite a time to drop you get a huge problem.
Prices and Wages
As said above, when the amount of money goes down prices and wages need to drop to compensate. Eventually, in the long run, all prices would go down, but often it takes some time. While the prices and wages are still high, yet the amonut of money is low, people buy less and employers and reluctant to hire. This creates a vicious economic circle.
Put in the simplist terms, the early thirties had brought extremely hard times, and the New deal was a way to ease the tough financial situations all across the county. With the help of two economists, John Stuart Mill and
John Maynard Keynes (who is considered the father of mondern economists), President Franklin Roosevelt devised a plan to add stability to the American economy.
The basic plan was to improve the economy by creating jobs. The government hired men to palnt forests and drain swamps. They had federal constructed and highways built. The whole point was to put more money in the economy, to give consumers more money to spend. That, of course, effected supply and demand, bring the American econmy slowly up.
Laisezz-Faire
Though it may sound simple, one of the best ways to improve a recession is to do nothing at all. When the government takes an attitude to let leave things be depressions can be short-lived.
Unemployment reached a gigantic scale during the thirties. With one quater (25%) of the public out of work, things were obviously quite tough. At the end of the decade the unemployment rate had dropped to a hopeful 17.5%. It would not be until World War II that the unemployment rate would drop to 3%.
With people scrambling for jobs, there were literally no worker's or employee rights. Unions were both worthless as well as powerless. Working conditions were also very poor. Often people would work 60 hour weeks without extra pay, too afraid of being fired to say anything. Often people would work on national holidays. Sometimes they were paid and often they were not.
Everyday Survival
As unemployment grew worse and worse the number of homeless people grew greater and greater, as people lost their properties or lost their could no longer pay their morgages. Many People lived in boxes or shacks, stuffing newspaper in their clothes of warmth. There were even whole "box cities", huge areas where the homeless flocked. Some could barely afford food or clothing.
Schooling was not a huge priority for children. While some students were eager to gain an education, many dropped out to help their parents, choosing survival over learning.