The great depression of 1933 was an economic dilemma that affected the World`s financial character. It started after the first world, and proceeded to end in the year 1933. This crisis was caused by the wars consequences. The First World War had hit at a period when industrial revolution promised much benefit to America. Production had moved from self-sufficiency for every homestead to national surplus and facilitated global trade. Globalization unified the entire continent, so that politicians could participate in western issues in general and cultural diversification is more elaborate than ever, economic challenges arising around the same time concerned.
Stock market crash
According to the Economic historians, they believed that the origin of the great depression was the sudden distressing crumple of US stock market prices. This market crash occurred on October 29, 1929, which was referred to as the Black Tuesday. According to research the market crash was moreover, a symptom rather than the cause of the great depression this turned to depress most of the business holders. The Government and the businesses were optimized that the economy would recover and they would soon start recovering from the losses incurred in the early 1930s. To recover from the great depression the Government had to spend more on their budget and the consumers were forced to cut down their expenditures by an average of 10%. The great depression played a major role in ruining civilians fortune across the states. It also had an influence on the confidence of the economy by disrupting Government year budget.
In the 1930s after the stock market crash, the US faced a severe drought that occurred in Mississippi valley. This was another major set back towards the economy since the agricultural sector one the major key factor towards the success of the economy was largely affected. The farmers in the states were largely depressed since their main source of income had been affected by the drought. This natural catastrophe affected the farmers to appoint hey would not pay their taxes or other depts. The drought also forced the farmers to sell their farms at a loss to cope with the life style conditions. The drought led to unemployment, high crime rate, high prices in the commodities and low export of the farm products. These factors largely affected the economy of the US to a point that compared to the other world leading nations its economic status was no match to them. These economic pressures forced the US to request for economic assistance from other nations to deal with the catastrophe.
Failing banking sector
United States was experiencing first growth and money being the greater aspect of financial progress, banks boasted of reaching great success. Such was a desirable, matter but came to be a challenge, the nation`s economy depended on bank financing. All activities including the funding of industrial projects and some link the banking sector, failure of banks had resulted in stocks trade failures, world war expenses and lack of a financially satisfying solution to mortgages and individual loans. Bankers were not able to receive projected profits as corporations could no-longer bank with them. These predicaments affected over 9000 banks. What`s more the insurance sector was not as developed as it is today, failure of banks meant that personal savings, and individual retirement reserves were lost. The few banks that remained operational were skeptical and refused to finance people out of poverty. This meant that people could only spend less that originally possible; hence, further economic depression.
Negative purchasing trend
The depression was exaggerated by further destructive trends. Industries collapsed as entrepreneurs felt the pinch of producing commodities that were rejected by the market. According to Bernanke (107), people felt that buying would result in further economic trouble are turned to reducing their purchasing habits. Buying less meant that industries could not keep they workforce as reduced sales caused financial loses. Financial tycoons decided to do away with some employees and America witnessed unemployment dilemma with rates reaching the height 25%. Consequently, what corporations had sold as the American dream, working hard and living the luxurious life appeared to reveal as unrealistic as people lost their jobs and sold their belongings. Auctioneers claimed more property and already jobless people had to deal with homelessness and increasing crime levels. From a holistic focus point, the country experienced financial ruin because of trading activities overdependence on employment. Failure to trade and keep the economy running resulted in consequences.
American Economic Policy in Europe
Due to the fall of businesses, the government came up with a strategic decision to protect the American companies. This was done by creating the Smooth-Hawley Tariff in the 1930s. The tariff was all about high taxes on the imports this was to control the trade between America and the foreign nations. On the other hand the government have low taxes on the locally manufactured goods this was to reduce the prices encouraging the civilians to purchase the local products. This played a major role in the uprising of the economy.
The great depression marked the fall down of the American economy for the first time in American history. It also had effects like emigration of civilians to their native countries and some of the US citizens migrated to Canada, Australia and others South Africa. The memory of the Great depression shaped up modern economic theories. There was also ways of how to deal with economic down turns such as social security and Keynesian economics.
Bernanke, Ben. Essays On The Great Depression. Princeton, N.J.: Princeton University Press, 2000. Print.
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