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The Great Depression and Contributing Reasons

Several post-World War I events triggered the 1930s Great Depression. Wall Street went into a panic after the October 1929 stock market crash, resulting in millions of investors’ losses. The beginning of a new age, the Roaring Twenties, and the Great Depression were significant events in history. Many social and political changes took place in the 1920s. More people lived in cities than farms for the first time in American history between 1920 and 1929, and the nation’s overall wealth increased by more than twofold. The third growth in per-capita income occurred throughout the 1920s, although the expense of living remained the same. In addition, the American economy was in a precarious state, and wealth was skewed in terms of distribution. The Great Depression was sparked by the stock market crash of 1929. Stocks fell very low hence they were dubbed “Black Tuesday” by the media. Post-crash, many Americans panicked and sold equities at meager prices. Another contributing reason to the Great Depression was bank collapses, which occurred more often during the period.

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Forcing Europe to pay back its debts after World War I only made the situation worse. Americans also lent money to foreigners, resulting in an even worse economy. Due to an unequal distribution of income in the US at the time, many Americans were unable to keep up with the global economy. However, the strategy of using credit to purchase goods and services only worked for a short period of time before making the situation even worse. When millions of people traded millions of shares on black Tuesday, the stock market collapsed. Everything went downhill in the following days, with no one buying anything and production halting. The stock market didn’t cause the Great Depression; it was merely a catalyst for it to occur faster. Approximately half of the banks had collapsed, and unemployment had risen to its greatest level ever.

The stock market’s volatility made it difficult to make loan payments. New loans were difficult to obtain since many banks went down, and those that remained were unwilling. Overproduction and lower demand resulted in the loss of American jobs. After losing their jobs, people could keep some of their assets by paying rent on a monthly or annual basis. Possessing a large amount of money can limit one’s employment options. The Great Depression limited bilateral trade due to a high import duty, which resulted in an economic reaction.

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