Essay on The Great Depression

Decent Essays

In 1929, A Yale University Economist Irving Fisher stated. " The nation is marching along a permanently high plateau of prosperity".(5) 5 days later the stock market crashed and the worst economic downturn in American history called the "Great Depression" began. The Depression started in 1929 and would last for a decade until we entered War World II. The Great Depression affected every part of economy and no job was safe. In 1929 unemployment was at 1.5 million and by 1933 unemployment reached over 13 million which meant 1 out of 4 were out of work (3). Some who were successful businessmen before the stock market crash and now selling pencils or apples on the street corners after the crash .Many business closed …show more content…

The problem being if one of these industries like automobile declines so does other industries such rubber, metal, and etc.
Extensive stock market speculation that took place during the latter part that same decade made the economy unstable. In 1925 the market value was $27 billion and by 1929 the market value had grew to $87 billion (5). New investors entering the market, many who viewed it as a get rich quick scheme, and lenders willing to loan them money helped inflate stock prices. Before the Great Depression, there were no effective legal guidelines on buying and selling stock. Free from such limitations, corporations began printing up more and more common stock to sell to make a profit . Many investors in the stock market practiced "buying on margin," that is, buying stock on credit (1). Confident that a given stock's value would rise, an investor put a down payment on the stock, expecting in a few months to pay off the balance of their initial investment while reaping a hefty profit. This investment strategy turned the stock market into a speculative pyramid game, in which most of the money invested in the market didn't actually exist. By 1928 the economy began to slow down, there were production surpluses and a downturn in business activity. The Federal reserve board took notice and hiked interest rates in an attempt to slow investors. They wanted to slow the investments to a pace more appropriate to the economic decline.

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