Essay about The Causes of the Great Depression

1006 Words Oct 20th, 1999 5 Pages
Since the beginning of the Industrial Revolution early in the nineteenth century the United States ad experienced recessions or panics at least every twenty years. But none was as severe or lasted as long as the Great Depression. Only as the economy shifted toward a war mobilization in the late 1930s did the grip of the depression finally ease.
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<br>Stock prices had been rising steadily since 1921, but in 1928 and 1929 they surged forward, with the average price of stocks rising over 40 percent. The stock market was totally unregulated. Margin buying in particular proceeded at a feverish pace as customers borrowed up to 75 percent of the purchase price of stocks. That easy credit lured more speculators and less creditworthy investors
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In 1929, the poorest 40 percent of the population received only 12.5 percent of aggregate family income, whereas the wealthiest 5 percent received 30 percent. Many people would spend their entire yearly paychecks on consumer goods. When this stopped the economy was hurt. Once the depression began this unequal distribution of wealth prevented people from spending the amounts of money needed to revive the economy.
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<br>President Herbert Hoover blamed the severity of the depression on the international economic situation. The war battered international economy functioned only as long as American banks exported enough capital to allow European countries to repay their debts and to continue to buy American goods. As U.S. companies began to cut back production, they also cut back their purchases of raw materials and supplies from abroad and as a result many European economies collapsed. American financiers sharply reduced foreign investment and consumers bought less foreign goods, debt repayment became even more difficult. As European conditions worsened, demand for American exports fell drastically. Finally, when the Hawley-Smoot Tariff of 1930 raised rates to an all time high, foreign governments retaliated by imposing their own trade restrictions, further limiting the market for American

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