The Great Depression happened between 1929-1939, and it was the deep-rooted economic downfall in the history of America. Many factors brought about The Great Depression. Domestic and foreign conditions contributed to the Great Depression's emergence, which brought about many events that affected the world. Different countries were affected across the globe, and it also affected the American economy in a significant way.
Domestic Causes
The Stock Market Crash
This crash in 1929 saw the begging of the Great Depression. The collision made investors to panic, and they could not invest in the stock market anymore. They were scared of losing their money, and this saw a decrease in customer spending and investing, and it brought a high level of unemployment as many companies lay off their workers. The majority of the investors lost a lot of money during the crash, and the it was termed “the genesis of the Great Depression” (Beaudreau, 2019).
Delegate your assignment to our experts and they will do the rest.
The Failing of the Banks
The collapse of banks contributed significantly to the Great Depression. Many banks failed due to the economic crisis brought about by the stock market crash. After the investors withdrew from the stock markets, the banks did not have enough money to sustain their services, and they started failing. When the banks started collapsing, people lost their money as they had not insured it, and this caused panic, and many customers withdrew their money from the banks causing many banks to close down. Although some banks survived the collapse, they were not willing to lend money to their clients or anybody else. People became broke, forcing them to reduce their spending. This was a blow to the economy as there was no flow of money in the country.
Reduction of Purchasing of Goods
When people started losing their purchasing power, it affected the economy, and this significantly triggered the Great Depression. After the stock market crash, and the loss of money in the bank collapse, consumers stopped purchasing goods and services as they did not have money. This saw a reduction in the production of goods, and it was considered a blow to the economy. Many people had lost their work, others lost money, and could not afford most items. Those that had purchased goods on hire purchase were not able to pay, and they were taken back. The unemployment level was very high, and this meant that people could not spend much, it became hard to build the economy once again as everybody was greatly affected.
The Drought Conditions
The environmental destruction contributed to the Great Depression. There was a one-year dry period that came about in 1930 in the Mississippi valley, "The dust bowl" made people desperate that they could not afford to pay taxes or any debt that they had. People did not have food and money as they suffered as they did not have ways to fend for their families. Each day they became desperate, and there was nothing they could do but watch the economy cripple.
Foreign Cause
The American Economic Policy
The American economic policy with Europe was the foreign factors that lead to the Great Depression. When businesses started failing, the government made an initiative to safeguard American businesses against foreign competitors, and this saw the creation of the Smooth-Hawley tariff in 1930. The tariff brought about very huge tax charging for the imports, and it also brought reduced business between America and the foreign countries. (Khan, 2019)
President Hoover’s Response to the Economic Emergency
It was considered an economic emergency in America, and it needed a very fast solution as the situation was getting worse each day. President Hoover took the initiative to work towards improving the economy and make it better for everybody. President Hoover responded to the stock market crash by asking his citizens to "Strengthen their belts and work extra hard" (Henretta, 2016). This was meant to assist make their economy better and change the country's situation. He requested the business community to help sustain the economy by not laying off their employees who will help in the production of goods, and they will also have money to pay off their debts and also pay their taxes, which will help boost the economy.
The President believed that the American citizens will volunteer to work and that they will spend money buying goods to help in boosting the economy. President Hoover took the initiative to improve the economy by giving jobs to unemployed workers. He improved the prices of the crops that the farmers had planted, and he also gave loans to the banks that had failed so that they could be able to be in business again.
President Hoover responded to the economic emergency by requesting the banks that survived the Great Depression to start giving loans to those who needed it. He assured them that all would be well, and they will not collapse as their economy will be back to a great state.
References
Henretta, James A. America: A Concise History, Volume 2, 6th Edition . Bedford/St. Martin's 9/2016. Vital Book file
Khan, S. (2019). Smoot-Hawley: Lessons from the most infamous US tariff act . SAGE Publications: SAGE Business Cases Originals.
Beaudreau, B. C. (Ed.). (2019). The Stock Market Boom and Crash of 1929 was Not a Bubble: A Book of Readings . Cambridge Scholars Publishing.
