Video:5 Causes of Great Depressionwith Martin Kelly
There is no agreed upon list of all the causes of the Great Depression, the worst economic depression in US history. However, there are a few top reasons that historians and economists have cited as having been causes of the Great Depression.See Transcript
Transcript:5 Causes of Great Depression
Possible Causes of the Great Depression
There is no agreed upon list of all the causes of the Great Depression, the worst economic depression in US history. However, there are a few top reasons that historians and economists have cited as having caused the Great Depression.
Stock Market Crash of 1929
Many believe that the stock market crash that occurred on Black Tuesday, October 29, 1929 is one and the same with the Great Depression. In fact, it was one of the major causes that led to the Great Depression. Two months after the original crash in October, stockholders had lost more than $40 billion dollars.
Throughout the 1930s, over 9,000 banks failed. Bank deposits were uninsured and thus as banks failed people simply lost their savings. Surviving banks, unsure of the economic situation and concerned for their own survival, stopped being as willing to create new loans.
Reduction in Purchasing Across the Board
With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items. This then led to a reduction in the number of items produced and thus a reduction in the workforce. The unemployment rate also rose above 25% which meant even less spending to help alleviate the economic situation.
American Economic Policy with Europe
As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation.
While not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was of such proportions that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves.
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