Effects Of The Great Depression On The Economy

933 WordsJun 27, 20154 Pages
TThe status of the economy when Roosevelt obtained presidency was characterized as very flawed and impaired. While President Herbert Hoover had relentlessly tried to mend the broken economy after the stock market crash of 1929 by establishing “Hoovervilles” and spending vast amounts of government money, the economy was still extremely damaged and broken. The Great Depression was not solely caused by the stock market crash, but a plethora of reasons. The stock market crash exposed the failing structure of the nation’s economy. First, many businesses selfishly set retail prices higher than needed to obtain maximum profit, while having minimum wage increases. This conglomerate effect led to a small percentage of the nation’s population obtaining the income, leading to the decrease of buying power as compared to the early “Roaring Twenties”. The gap between the poor and the wealthy grew larger, and stock prices substantially inflated. Banks were loaning money to investors of stocks, and in many situations, stock-buyers couldn’t pay the banks back, resulting in bankruptcy. Due to low wages, the rate of investing also plunged and revealed the distorted corporate profits and structure. Another reason contributing to the low point of the economy was the gold standard. It was thought that gold backed up paper currency, and when economic supply production decreased, leaders thought to constrain the money supply. However, in reality, the economy needed a boost at this time. Corporate
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