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In: Economics

The Great Depression was the greatest economic disaster that the United States has ever faced. A...

The Great Depression was the greatest economic disaster that the United States has ever faced. A number of factors have been suggested as the cause of the Depression. Discuss at least three of the factors that you feel were the most important reasons for either causing the economic turmoil or responsible for exacerbating it.

Solutions

Expert Solution

The stock plummeted at the opening bell on Thursday 24 October, sparking a panic. Although investors tried to halt the slide, the stock collapsed just five days later on "Black Tuesday," losing 12 per cent of its value and wiping out $14 billion in investment. Two months later, stockholders lose more than $40bn. Although by the end of 1930 the stock market regained some of its losses, the economy had been devastated. America has now fallen through what's called the Great Depression

Across the world the repercussions of the stock market crisis tore. During the final months of 1929 almost 700 banks failed, and more than 3,000 crashed during 1930. Federal deposit insurance was as yet unheard of, and people lost all of their savings when the banks collapsed. Several people panicked, sparking bank runs as people removed their money in fear, which in effect caused more banks to close. Nearly 9000 banks had collapsed by the turn of the decade. Surviving institutions were reluctant to lend money, unaware of the economic condition and anxious about their own safety. This worsened the problem, resulting in ever less expenses.

With the deposits of citizens useless, their savings reduced or exhausted, and credit closely to non-existent, customer and company consumption stagnated. Workers were eventually laid off en masse. When citizens lost their jobs in a chain reaction, they were unable to keep up with paying for things they had ordered on installment plans; repossessions and evictions became commonplace; Stock that was rapidly unsold continued to accumulate. The unemployment rate has soared above 25%, which has meant even less investment to help ease the economic crisis.

Environmental disruption intensified the global misery of the Great Depression. A lengthy drought combined with agricultural methods that did not use soil management techniques created a large region from southeast Colorado to the panhandle from Texas that came to be called the Dust Bowl. Huge storms of dust polluted cities, killing crops and livestock, sickening people and causing untold millions of damage. Millions left the city when the economy crashed, something John Steinbeck chronicled in his "The Grapes of Wrath" masterpiece. It would take years, if not decades, until the climate in the city improved.


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