The great depression is the term used to refer to the economic downfall that was experienced in the 1930s. The depression is said to result from the stock market crash event that occurred on the October 27th, 1929; with this day being referred to as the black Thursday (Kangas). The depression ranks as the most severe and longest in the global history as it spanned for a period of one decade, from 1929 to 1939.
The depression was preceded by an economic boom. In the United States, companies were trading highly as the economy and the country was recovering from the effects of World War I, as well as the fact that the economy was enjoying the fruits of industrialization. More significantly the average stock prices rose by 40% during the period ranging from May 1928 to September 1929 (Kangas). However, some economists and analysts indicate that this boom was largely artificial. The stock prices rose due to increased demand for the stocks as people thought that the stocks were an easier way of increasing wealth. This increment was against the norm were a stock grows as a result of a company performance. The recession began in August of 1929, when annual rate, commodity prices, and individual incomes dropped significantly. As a consequence, people rushed to sell the stocks to salvage their wealth (Shmoop). The stock market took a deep on the Black Thursday.
Causes of the Great Depression
There are several factors that said to be the main contributors to the great depression. However, these factors are categorized under two perspectives, namely: economists’ perspective and monetarists’ perspective. Under the economists’ view, the causes of depression are related to the demand-driven theories (Shmoop). The view dictates that the depression resulted from a burst of an economic bubble that was created through under-consumption that is accompanied by over investment. This analogy led to low demand that in turn contributed to a decrease in production. On the other hand, the monetarists’ perspective indicates that the depression resulted from some poor policies made by the monetary authorities (The George Washington University). For instance, the debt deflation policy led to some significant disadvantages to borrowers, as they ended up owing more in real financial terms.
The depression was averted through several significant recommendations made to enable proper recovery. In the United States, one of the major recommendations made and implemented was the New Deal; that is a policy pushed in 1932 by the then President, President Roosevelt (Kangas). The New Deal offered some long-term as well as short-term remedies to the US economy. The New Deal summed up a series of domestic programs that were implemented in 1933 through 1938 (The George Washington University). One of the most significant avenues followed in implementing the new deal was addressing the employment issues. Introduction of unemployment compensation and relief, social security and minimum wage as well as stimulating the public employment service came in had in reducing the unemployment effects of the depression (Shmoop). Additionally some of the programs undertaken focused on the rejuvenating the economy. Programs like the Economy Act of 1933 worked significantly well to provide the much-needed fund to finance any emergency budgets, which were necessary to defeat the depression (The George Washington University). In addition, the Emergency Banking Act helped to provide the much-needed regulation and supervision in a rogue sector that had a great contribution to the crisis.
Kangas, Steve. ‘Timeline Of The Great Depression’. Hyperhistory.com. N.p., 2015. Web. 10 Feb. 2015.
Shmoop,. ‘Economy In The Great Depression’. Shmoop. N.p., 2015. Web. 10 Feb. 2015.
The George Washington University,. ‘The Great Depression (1929-1939)’. Gwu.edu. N.p., 2015. Web. 10 Feb. 2015.