From 1929 to 1941, a period of time began in the United States that was referred to as the Great Depression. A lack of confidence led to withdrawals in order to protect money, draining the banks ' reserves and destroying their ability to make loans. This mistrust affected the entire economy and started a dangerous cycle. Since that time, there has been much historical debate over what actually caused it, and many theories have been proposed to explain how a country’s economy could fail so suddenly and dramatically. However, the banks were the biggest problem and explain a majority of the issues. The Great Depression was a time of great economic struggle mainly caused by the mistrust of the banks ' failing policies, poor bank supervision, and
…show more content…
During his presidency, Hoover passed the Revenue Act of 1932, which raised these taxes. This has often been referenced as his biggest mistake. Raising taxes during a dismal financial time, such as a depression, is often a huge mistake and causes the "undoable" to occur (as Congress called it in 1982). The effect of the Revenue Act was detrimental to the economy and seemed to cause the depression to last longer. Economists have said that the downward spiral of the depression from 1932-33 was a direct result of the Revenue Act. Many people were forced to withdraw their money from the banks in order to pay the new taxes. Even though this was called his greatest mistake, the Revenue Act was actually very reasonable. These taxes were far less detrimental than a sales tax would have been, as the consumers and the common man would then be forced to bear the burden. With the Revenue Act, consumption did not go down. Despite the Act’s harmful effect, this could not have been a main cause for the depression, or even a main cause for the downward spiral since the majority of the tax burden fell upon high-income families and manufacturers. For example, taxes were raised on families earning more than $1 million per year and on estates that cost more than $10 million. Therefore, the Act’s tax burden fell mainly on families that could afford
During his presidency, Hoover passed the Revenue Act of 1932, which raised these taxes. This has often been referenced as his biggest mistake. Raising taxes during a dismal financial time, such as a depression, is often a huge mistake and causes the "undoable" to occur (as Congress called it in 1982). The effect of the Revenue Act was detrimental to the economy and seemed to cause the depression to last longer. Economists have said that the downward spiral of the depression from 1932-33 was a direct result of the Revenue Act. Many people were forced to withdraw their money from the banks in order to pay the new taxes. Even though this was called his greatest mistake, the Revenue Act was actually very reasonable. These taxes were far less detrimental than a sales tax would have been, as the consumers and the common man would then be forced to bear the burden. With the Revenue Act, consumption did not go down. Despite the Act’s harmful effect, this could not have been a main cause for the depression, or even a main cause for the downward spiral since the majority of the tax burden fell upon high-income families and manufacturers. For example, taxes were raised on families earning more than $1 million per year and on estates that cost more than $10 million. Therefore, the Act’s tax burden fell mainly on families that could afford