The Great Depression The Great Depression was one of the worst periods in American History, with millions of Americans becoming prominently poor. It began in 1930, and lasted for about 15 years, making it the longest depression of recent memories. The entire world saw a significant decrease in their economy, and it originated in the United States. This took place once the stock prices fell, which ultimately resulted in the stock market crash of October 29, 1929. This day became known as Black Tuesday for its devastating effects that affected the poor and the rich alike. With the stock market crash, personal income declined significantly, the government was collected significantly less money in taxes, and unemployment rates increased to as high as one third of the population. There are a number of main causes for this incident, and various reasons for why it lasted so long. One of the causes of the Great Depression is the decline in construction and agriculture. Prior to the stock market crash, there appeared to be a boom in construction that took place in 1918. This large construction boom had been helping the economy significantly, and it would ultimately lead to its downfall. After rising throughout the years, the construction boom would decline in 1928 (Walton 420). Additionally, the agriculture sector had a similar effect. In the 1920’s agriculture was booming, and generating lots of revenue for the economy. It would face a significant decline that would have an impact on the economy. The Smoot-Hawley Tariff is one of the major causes of the Great Depression as well that drove the economy downward. “The tariff was passed in June 1930. It raised tariffs on a wide array of goods, especially agricultural products” (Walton 426). Thousands protested against the tariff, and many prominent leaders even signed a petition that they gave to President Hoover. The issue with the tariffs is that the high tariffs would reduce imports. This made it more difficult for other countries to profit from U.S. exports, and many believed that other nations would react by doing the same. They were ultimately right, and the other countries did increase their tariffs as a form of retaliation. This would impact trade significantly, causing trades between countries to decline. This feat decreased profits for markets all over the world, and would become one of the major causes of the Great Depression. The stock market crash was the most prominent cause of the Great Depression, and its effects were more devastating than any other. There was a significant increase for industrial stocks, which is why so many had been entrusted in placing their life savings in there. The shares were 110 in 1924, 338 in January of 1929, and 452 in September of 1929 (Walton 421). This significant rise had led many to believe that they would inevitably attain a return on their investment, which is what caused so many Americans to invest their life savings. Technology was booming in the ...

1. The Great Depression
The Great Depression was one of the worst periods in American
History, with millions of Americans becoming prominently
poor. It began in 1930, and lasted for about 15 years, making it
the longest depression of recent memories. The entire world saw
a significant decrease in their economy, and it originated in the
United States. This took place once the stock prices fell, which
ultimately resulted in the stock market crash of October 29,
1929. This day became known as Black Tuesday for its
devastating effects that affected the poor and the rich alike.
With the stock market crash, personal income declined
significantly, the government was collected significantly less
money in taxes, and unemployment rates increased to as high as
one third of the population. There are a number of main causes
for this incident, and various reasons for why it lasted so long.
One of the causes of the Great Depression is the decline in
construction and agriculture. Prior to the stock market crash,
there appeared to be a boom in construction that took place in
1918. This large construction boom had been helping the
economy significantly, and it would ultimately lead to its
downfall. After rising throughout the years, the construction
boom would decline in 1928 (Walton 420). Additionally, the
agriculture sector had a similar effect. In the 1920’s agriculture
was booming, and generating lots of revenue for the economy. It
would face a significant decline that would have an impact on
the economy.
The Smoot-Hawley Tariff is one of the major causes of the
Great Depression as well that drove the economy downward.

2. “The tariff was passed in June 1930. It raised tariffs on a wide
array of goods, especially agricultural products” (Walton 426).
Thousands protested against the tariff, and many prominent
leaders even signed a petition that they gave to President
Hoover. The issue with the tariffs is that the high tariffs would
reduce imports. This made it more difficult for other countries
to profit from U.S. exports, and many believed that other
nations would react by doing the same. They were ultimately
right, and the other countries did increase their tariffs as a form
of retaliation. This would impact trade significantly, causing
trades between countries to decline. This feat decreased profits
for markets all over the world, and would become one of the
major causes of the Great Depression.
The stock market crash was the most prominent cause of the
Great Depression, and its effects were more devastating than
any other. There was a significant increase for industrial stocks,
which is why so many had been entrusted in placing their life
savings in there. The shares were 110 in 1924, 338 in January of
1929, and 452 in September of 1929 (Walton 421). This
significant rise had led many to believe that they would
inevitably attain a return on their investment, which is what
caused so many Americans to invest their life savings.
Technology was booming in the 1920’s, and the stocks of the
companies that produced these innovations were soaring
rapidly. These companies included Radio Corporation of
America (RCA) and General Motors, whom invented goods such
as the radio, automobiles, and telephones (“Wall Street Crash”).
“Investors were infatuated with the returns available in the
stock market especially with the use of leverage through margin
debt” (“Wall Street Crash”). The margin debt is securable
through stocks or bonds, and provided them a form of collateral
that enables protection to the banks that loan them. Aside from
investing with their own money, they had acquired loans to use
in the stock market. Investors that were playing in the stock
market were making a fortune, which caused other Americans to

3. follow suit. “President Hoover and officials at the Federal
Reserve worried about excessive speculation and the danger of a
crash” (Walton 421). Sure enough, their worst nightmare would
come to life. The 1929 stock market crash “significantly
accelerated the mild downturn then under way because of the
catastrophic magnitude of the decline and the uncertainty it
created about the future course of the economy” (Walton 421).
This single crash would have devastating effects that would
impact the functionality of the United States economy, which
would ultimately impact the world as well. This single incident
would spark the Great Depression, and it has become the most
evident factor of all.
Another cause of the Great Depression was the banking crisis
that took place. “Morale might have improved, and the stock
market and the economy might have regained some buoyancy
had it not been for the structural weaknesses of the banking
system” (Walton 424). This is due to the wave of bank failures
that took place in the early 1930’s as a consequence of the
crash. “After the crash during the first 10 months of 1930, 744
banks failed – 10 times as many. In all, 9,000 banks failed
during the decade of the 30s. It's estimated that 4,000 banks
failed during the one year of 1933 alone. By 1933, depositors
saw $140 billion disappear through bank failures” (“Bank
Failures”). The bank failures had made the economy worse, and
were impacting the economy significantly. They are directly
linked to the decline of the economy, and they continued to
drop throughout the years due to lack of support.
The Great Depression prolonged because nobody helped the
banks recover in their time of need. “Although losses were
heavy, these failures drew little attention from the Federal
Reserve or the national media” (Walton 424). The government
ignored the fact that banks were shutting down at a rapid rate,
and decided not to take any action. This ultimately turned into
the largest bank failure of United States history. Many

4. historians agree that the Federal Reserve should have lent
money to the banks, acting as a “lender of last resort” (Walton
424). The banks had become the foundation of which to
stabilize the economy, and nobody was acting out to save them.
They allowed them to fail throughout the years, and it provoked
the economy from mending itself.
The Great Depression was able to last so long because of the
fear that plagued the economy. People were worried about their
money, and it prevented banks from functioning properly. “At
times a rumor that a bank was in trouble would send people
running to the bank to try to get their money out before the bank
closed its doors, the classic sign of panic” (Walton 425). This
ultimately caused people to be scared of giving their money to
banks, which caused them to carry cash instead. This further
hurt the banks, and deprived them of bank reserves. This had a
devastating effect on banks: they refused to hand out loans in
order to build their reserves. As a consequence, there were less
bank deposits and less loans being given out. The economy was
only getting worse through this fear, and it was preventing any
possibility of solving the issue.
The Great Depression had such a lasting impact on the economy
because the Federal Reserve failed to expand the money supply.
“Federal Reserve officials failed to respond appropriately. Most
explanations fall into two categories. One holds that Fed
officials, though well-intentioned, failed to understand that
more aggressive action as needed” (Wheelock). The economy
was suffering in front of them, and they did not proceed to make
the right moves in order to ensure that the money would flow
adequately. This could have occurred due to lack of experience,
but it would ultimately be one of the primary factors that
prolonged the Great Depression for as long as it did.
The Great Depression was a terrible time period in United

5. States history that has taught us lessons with hopes of never
having such a depression again. There was lack of trade
between nations; thousands of banks shut down, and millions of
Americans found themselves to have a lack of food. The causes
of the Great Depression have been analyzed by economists
throughout the world in order to understand how it has been
caused. They have learned that tariffs should be kept relatively
low in order to keep trade markets open between nations, and
that the banks should always be helped out if they are
struggling. Additionally, they need to monitor the sectors in
order to see how well the economy is functioning as a whole.
Americans have learned a lot from this experience as well, such
as making better choices. Millions rushed after in order to
invest their stocks in the market, and all of them would
ultimately become devastated by the chance that they took with
their life savings. The fear of the banking crisis also taught
people that they should not withdraw their money from the
banks all at once because it will have a significant effect on the
economy. When banks are in a failure crisis, they will not
provide out loans in order to meet their reserve. For this reason,
it is best to take care of the banks in order to ensure that the
economy is functioning better. The Federal Reserve has also
learned to improve the money flow throughout the economy in
order to ensure that this issue does not happen again. They
weren’t as aggressive in their action during the Great
Depression, and they have learned that they should be if it ever
happens again.
References:
"Bank Failures." N.p.. Web. 11 Dec 2013.
<http://www.livinghistoryfarm.org/farminginthe30s/money_08.h
tml>.
"Wall Street Crash." Wall St Crash News and Stock Market
History. N.p.. Web. 11 Dec 2013.

6. <http://www.wallstcrash.com/wall-street-crash-1929/>.
Walton, Gary M., and Hugh Rockoff. History of the American
economy. 11th ed. San Diego
: Harcourt Brace Jovanovich, 2012.
Wheelock, David C.. "Monetary Policy in the Great Depression:
What the Fed Did, and
Why." . N.p.. Web. 11 Dec 2013.
<http://research.stlouisfed.org/publications/
review/92/03/Depression_Mar_Apr1992.pdf>.