|Type of paper:||Term paper|
|Categories:||The Great Depression American history|
In the 1920s American economy was doing well and it was even referred to as the prosperity decade. Everybody loved that the economy was favorable and they were able to achieve a lot from the housing and being able to even drive a car. Business was booming. Life was great as a new sense of freedom emerged after World War 1 and life seemed to be moving fast. The economy was changing from agriculture based on manufacturing based. However, this was suddenly halted by the great depression. Several economic factors that existed at the time led to the great depression that remains in the history books of the American economy. There were weaknesses that existed in the economy of 1920s that eventually led to the worst depression of 1930s.
Income inequality that existed in the American economy was a major weakness that existed and caused the economic depression that was worst in American history. This is a situation where you find that only 1% of the population is rich and determines the direction the economy takes. The remaining 99 % of the population is depended on the decisions made by the 1 % that control the economy. At the onset of the great depression, the economic crisis hit the 1% that controlled the factors of production and that had a trickle-down effect on the whole economy thus affecting the whole American population (Stuckler, 2012).
The period of economic prosperity of the 1920s was occasioned by the growth of the stock market. The stock market was not well regulated. In 1929 the stock market crashed and this was a major cause of the great depression. The stock market had held the growth of the economy and with its crash crashed the prosperous economy of the 1920s leading to the worst economic depression. The stockholders had lost a lot of money which negatively impacted the economy. Congress in 1929 introduced a protectionist policy after the stock market crash to help protect the American farmers and companies from imports from European countries. The policy makers felt that with higher taxation of foreign products, the American economy will be better but thus made it even worse and contributed to the great depression (Stuckler, 2012).
The prosperous period of the 1920s made it possible for banks to grow and savings from customers to increase. The mismanagement of savings by banks and lack of insurance of the savings made the depositors lose a lot of money due to the prevailing economic circumstances and made the economic depression even worse. Lack of insurance to bank depositor's funds and failure of banks to provide loans to its customers made it worse for the economy thus contributing greatly to the economic depression that hit the American economy hard. The Federal Reserve did not give financial support to banks that were collapsing. That worsened the situation from recession to the great economic depression that it became. As the money supply tightened and became limited, the Federal Reserve did not create more cash supply thus leading to the great depression (Stuckler, 2012).
The economic depression of the 1930s remains in the history books of America and students are taught of the impact it had on the country. Economists use it as an example of how worse it can get off the economy of the right measure is not put in place for the economy to grow positively. After the end of World War 2, the American economy regained its positive growth and apart from the 2008 economic recession, it has remained strong and favorable for Americans.
Stuckler, D., Meissner, C., Fishback, P., Basu, S., & McKee, M. (2012). Banking crises and mortality during the Great Depression: evidence from US urban populations, 1929-1937. J Epidemiol Community Health, 66(5), 410-419.
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