The Real Causes of the Depression

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Statistics show right now in the United States the unemployment rate is high. A lot of people are saying that this is bad and the economy is slowly going downhill, but most people forget to think that these things are normal and is nothing worse than the Depression of the 1930s. Although some people say that the Depression was caused by the Smoot-Hawley Tariff Act, it was strictly due to many reasons that were unrelated to the Act. The Smoot-Hawley Tariff Act was signed by President Herbert Hoover on June 17, 1930. It had been proposed in 1929 and was passed in June of 1930 by Congress (Burg 63). Two men by the name Reed Smoot and Willis C. Hawley, who were republicans, sponsored this Act, but 46 states did not see the significance or how…show more content…
This is usually said to have been a result of Smoot-Hawley, although when looking further this statement could not have been more wrong. For the economy to be stable there needs to be equilibrium, which is a stable balance between spending and other factors within the government. Stein suggest that this is usually based upon “...spending by households on consumption goods [S], spending by households and firms on investment goods---such as houses, machinery and equipment (I), spending by the government on goods and services (G), and net exports, which are the difference between spending on exports by foreign households and firms (EX) and spending on imports by domestic households and firms (IM) equilibrium[(Y) the equation is], Y=S+I+G+(EX-IM)”(O’Brien). During the Depression the two categories that were lacking were the food or consumption and investment spending. This caused a huge drop in employment (O’Brien). When people stop buying food as often for their family and themselves to eat, there are less people need to keep up with the once busier stores. Therefore, a drop in jobs occurs, and the same happens when people stop investing in things because of the lesser amount of money. In 1933, the unemployment rate was at its highest, 24.9 percent (Numbers). A way to see that Smoot-Hawley did not affect this is to compare the early 1930s with the mid-1930s. Later, during the mid-1930s there was a recession
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