Causes Of The Great Depression Essay

1699 Words7 Pages
In 1929 the stock market crashed, triggering the worst depression ever in U.S. history, which lasted for about a decade. During the 1920s, the unequal distribution of wealth and the stock market speculation combined to create an unstable economy by the end of the decade. The unequal distribution of the wealth had several outlets. Money was distributed between industry and agriculture within the U.S.; in social classes, between the rich and middle class; and lastly in world markets, between America and Europe. Due to the imbalance of the wealth, the economy became very unstable. The stock market crashed because of the excessive speculation in the 1920’s, which made the stock market artificially high (Galbraith 175). The poor…show more content…
An example of this type of legislation is the Revenue Act of 1926, which significantly reduced income and inheritance taxes (Goldston 23).

The introduction of credit to the American public proved to choke the economy rather than to stimulate it. To make an economy run properly, the total demand must equal total supply. The economy of the 1920s produced an over supply of goods. It was not that the surplus products were not wanted, but that the people who needed them could not afford the products. The working class spent most of their money on things they needed: food, shelter, and clothes. They also purchased some luxury items, but their income limited them to only a few of these purchases. Meanwhile, the rich were enjoying their increased profits. While the vast majority did not have enough money to satisfy all of their material wants and needs, the manufactures continued to produce surplus goods. Recognizing that the surpluses could be sold if consumers were financially able to buy them, the concept of buying on credit was established. Credit was immediately popular. Nearing the end of the decade, 75 percent of all automobiles were purchased on credit (EV 526). The credit system created artificial demand for products which people could not usually buy. People could not spend their regular wages to purchase products, because much of their income went toward their credit payments.

The poor distribution of wealth within the U.S extended to entire
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