2008-09-30 19:01:08 UTC
1. Stock Market Crash of 1929
Many believe erroneously that the stock market crash that occurred on
Black Tuesday, October 29, 1929 is one and the same with the Great
Depression. In fact, it was one of the major causes that led to the
Great Depression. Two months after the original crash in October,
stockholders had lost more than $40 billion dollars. Even though the
stock market began to regain some of its losses, by the end of 1930, it
just was not enough and America truly entered what is called the Great
2. Bank Failures
Throughout the 1930s over 9,000 banks failed. Bank deposits were
uninsured and thus as banks failed people simply lost their savings.
Surviving banks, unsure of the economic situation and concerned for
their own survival, stopped being as willing to create new loans. This
exasperated the situation leading to less and less expenditures.
3. Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes,
individuals from all classes stopped purchasing items. This then led to
a reduction in the number of items produced and thus a reduction in the
workforce. As people lost their jobs, they were unable to keep up with
paying for items they had bought through installment plans and their
items were repossessed. More and more inventory began to accumulate. The
unemployment rate rose above 25% which meant, of course, even less
spending to help alleviate the economic situation.
4. American Economic Policy with Europe
As businesses began failing, the government created the Hawley-Smoot
Tariff in 1930 to help protect American companies. This charged a high
tax for imports thereby leading to less trade between America and
foreign countries along with some economic retaliation.