Question

What were the causes and effects of the Great Depression? Use all of the following terms/concepts/names in your one-two page paper.

Herbert Hoover

Franklin Delano Roosevelt

Securities and Exchange Commission

Stock Market

Shantytowns

Unemployment

Overproduction

Undercomsumption

False prosperity

Credit

Speculation

New Deal

Answer 1

                                    The Great depression was the worst economic downturn that happened in the history of world in general and USA in particular. The effects of the depression lasted from 1929 to 1939 for a decade which started with the stock market crash that caused a panic situation in the Wallstreet.

                                    The US economy was growing rapidly with the nation’s total wealth more than doubled between 1920’s and 1930’s. Thus, most of the millionaires started investing in the stock market of USA which went in to a rapid expansion by 1929. It was at that time that the economic expansion reached the peak and then went in to a declining stage wherein the production started to decline which caused a subsequent decline in the employment opportunities. Herbert Hoover was the President of USA during the time of Great depression. It was during this time that the speculation in the stock market started to increase and caused inequality distribution in the economy to a large scale. Hoover viewed a lack of confidence in the financial mechanism of the nation as the fundamental economic problem during these times. He urged the stoppage of wage cuts and work stoppages, but with the fall of banking mechanism the monetary issues were increased and hence led to a economic spiral downward.

                                    ‘Hooverville’ was a kind of shantytown that was established during the times of great depression which blamed the actions of Hoover taken during the times of great depression. The worldwide GDP fell by more than 15% between 1929 and 1932. There were subsequent drops in the personal income, tax revenue, profits etc around the globe which caused a great decline in the prices of commodities that started affecting the production and thus caused a rise in the unemployment in the world. The unemployment levels in the US rose to more than 23% by 1932 and in many other nations it reached to more than 30%. The international trade fell by more than 50% and the crop prices fell by more than 60% which caused a greater farm crisis.

                                    It was in 1933 that Franklin Roosevelt took charge and brought in many measures to curtail the effects of the great depression. ‘New Deal’ was such a program that aimed at improving the employment opportunities of the society and thus aimed at improving the production rates in the economy thereby bringing back the economy of USA back to normalcy. The Congress passed the Securities Act in 1933 and together with the Securities Exchange Act f 1934, it helped in the establishment of the Securities and Exchange Commission which started to identify various fraudulent speculative activities that happened in the stock exchange during those times.

                                    Thus, with the widespread implementation of the 3 R’s of the New Deal, ie; Relief of the unemployed and the poor, Recovery of the economy back to normal levels and the Reformation of the financial system to prevent further depression, the economy was slowly brought back to its normal levels by the end of 1930’s which was instrumental in re-establishing the lost supremacy in the international economy and the trade levels were also brough back to normal levels.