Causes and Effects of the Great Depression
The Great Depression was one of the worst economic downtime experienced across the globe. Before the event, America had already gone through a harsh economic time and the Depression worsened the situation. It sent panic and depression globally in and it paved way for other tough economic times even though many countries have recovered to a larger extent from the Great Depression of the 1930.
Causes of the Great Depression
Crash of the stock market was one of the causes of the Great Depression. This had begun in early 1920s and it grew worse by the day. Many people bought on margin and it meant that they paid only part of stock and sold the rest.
Stock market later crashed in October 1929 and clients were forced to pay stocks. They paid less the worth of stocks they had bought. Some couldn’t even repay loans and this left many lenders broke.
Increase in the number of poor people
Many manufacturers and retailers were forced to lay off their products or sell them at extremely low prices to enable poor people to purchase them. In 1920s many poor people were not in a position to buy quality products. The situation increased the number of poor people and as they paid their low cost debts, manufactures suffered great losses.
Small banks in many rural areas had overextended their credits to farmers. However, the farmers could not repay their loans on time. The situation was even worse because big banks had overextended loans to foreign countries. European nations defaulted loans and the banks went bankrupt. This also sent panics and it almost crippled the banking system in the United States.
Before the Great Depression American farmers were having a hard time because of overproduction. Many of them were therefore forced to burn corn as opposed to selling it and it translated to financial loses.
Environmental factors including production of vast agricultural crops led to overblowing of farmland. The quality of topsoil became low because prairie grasses were stripped. This was also coupled with long term drought and the worst in history. Great Plains turned into Dust Bowls and dry winds picked top soil and blew it across the prairies. Huge suffocating clouds were formed as a result and it buried towns and turned created deserts out of farms.
Government inaction also led to the Great Depression. It pushed for a Federal Reserve System to lend money to different financial institutions.
Effects of the Great Depression
- The effects of the Great Depression were staggering. Many people were rendered jobless
- It also caused drought and there were a number of poor people that starved
- Breadlines were established to prevent severe starvation
- Millions of families lost their homes and took up residence in shantytowns, old cars and packing crates
- President Hoover was also blamed for the Great Depression
- Thousands of farmers also lost their homes in Arkansas and Oklahoma. They headed to California in search of greener pastures. In California, the farmers met migrant laborers and started to make a living by picking fruits.
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