Causes of the Great Depression

Before we start analyzing the main causes of the Great depression we need to know what the great depression was, it was a worldwide economic downturn starting in most places in 1929 and ending in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in the 20th century, it´s used in the 21st century as an example of how far the world's economy can fall. All the world was affected. It was originated in the US. It was not just one factor that caused it, but several factors.

Here a list considering the most important facts that led to the Great Depression.

The stock market crash, on October 29, 1929 is one of the big causes. (The stock market is an everyday term we use to talk about a place where stocks and bonds are "traded", meaning bought and sold. For people, that is the first thing that comes to mind for investing. The goal is to buy the stock, hold it, and then sell the stock for more than you paid for it). Two months after this crash, stockholders lost more than 40 billion dollars. After some time the stock market regained some of it losses, but it wasn’t enough and America entered to the Great Depression.

After this stock market crash people started to be afraid and stopped to purchase items. This led to a reduction in the number of items produced and a reduction in the workforce. People started to lose their jobs so they started to be unable to keep up with paying for items they had bought through installment plans so their items were repossessed. As a consequence more inventories began to accumulate.

The percentage of people without work rose above 25% this was a huge problem to society.

Another cause: the American Economic policy with Europe. Because business began to fail, the government created the smooth-Hawley tariff in 1930 to help protect the American countries, raising US tariffs to high levels. This charged a high tax for imports and lead to less trade between America and foreign countries. As consequence the world trade declined. The Smoot-Hawley Tariff fostered distrust among nations leading to less cooperation in the political and economic realms.

And finally the drought on Mississippi Valley in 1930 was another cause. Droughts are caused by a depletion of precipitation over time. This drought was of such proportions that many couldn’t pay their taxes or other debts and had to sell their farms for no profit to themselves. Since this drought destroyed a large part of agricultural production, it contributed to the Graeat depression.


The Great Depression had really bad effects on society and in the world. People stayed without work and the entire world was subjected to this big crisis. The stock market crash was the biggest cause because many people stayed without work and banks closed, meaning lots of looses for society.


References:
http://wiki.answers.com/Q/What_was_the_Great_Depression
http://en.wikipedia.org/wiki/Great_Depression
http://www.freerepublic.com/focus/f-news/2015890/posts
http://americanhistory.about.com/od/greatdepression/f/smoot_hawley.htm

THIS CAN HELP YOU: http://www.youtube.com/watch?v=-b1dTvNaL0Q

Valerie V.