great depression causes

Read and learn more about great depression causes. For more, visit the Depression website DepressionLearning.com

Q: How did the effects of World War I contribute to causes of the Great Depression?
What were some of the effects of WWI?
What were the causes of Great Depression?

A: Great Depression

The Great Depression was a worldwide economic downturn, starting in 1929 (although its effects were not fully felt until late in 1930) and lasting through most of the 1930s. It centered in North America and Europe, but had damaging effects around the world. The most industrialized countries were affected the worst, including the United States, Germany, Britain, France, Canada, and Australia. Cities around the world were hit hard, especially those based on heavy industry. Construction virtually halted in many countries. Farmers and rural areas suffered as prices for crops fell by 40-60% Willard W. Cochrane. Farm Prices, Myth and Reality 1958. p. 15; League of Nations, World Economic Survey 1932-33 p. 43. . Mining and logging areas were perhaps the hardest hit because demand fell sharply and there was little alternative economic activity. The Great Depression ended at different times in different countries; for subsequent history see Home front during World War II.
Dorothea Lange’s Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, a mother of seven children, age 32, in Nipomo, California, March 1936.

Causes of Depression
Scholars have not agreed on the exact causes and their relative importance. There are multiple issues—what set off the first downturn in 1929, what were the structural weaknesses and specific events that turned it into a major depression, and how did the downturn spread from country to country.

In terms of the 1929 small downturn, historians emphasize structural factors and the stock market crash, while economists point to Britain’s decision to return to the Gold Standard at pre-WWI parities ($4.86 Pound) (Peter Temin, Barry Eichengreen).

Although some believe the Wall Street Crash of 1929 was the immediate cause triggering the Great Depression, there are other, deeper causes that explain the crisis. The vast economic cost of World War I weakened the ability of the world to respond to a major crisis. In Europe, the question of the war reparations was fundamental to the economic and political history of France, Germany, Britain and the United States, but the greatest effect was on Germany, since that country had to pay the largest portion of reparations[1].

The search for causes is closely connected to the question of how to avoid a future depression, so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. Current theories may be broadly classified into two main points of view. First, there is orthodox classical liberal, monetarist, Keynesian, Austrian Economics and neoclassical economic theory, which focuses on the macroeconomic effects of money supply, including production and consumption. Second, there are structural theories, including those of institutional economics, that point to underconsumption and overinvestment (economic bubble), or to malfeasance by bankers and industrialists.
The Stock Market crash
The stock market crash of October 1929 is partially responsible for causing the Depression. According to Milton Friedman, “the stock market (crash) in 1929 played a role in the initial recession.” It clearly changed expectations of the future, shifting the outlook from very positive to negative, with a dampening effect on investment and entrepreneurship. There was a brief recovery in the market in early 1930, but late in the year it began almost continuously to bounce downwards for the next two years, producing the greatest long-term market declines by any measure.
Debt
Macroeconomists, including Ben Bernanke, have revived the debt-deflation view of the Great Depression originated by Arthur Cecil Pigou and Irving Fisher. In the 1920s, the widespread use of the home mortgage and credit purchases of automobiles and furniture boosted spending but created consumer debt. People who were deeply in debt when a price deflation occurred were in serious trouble—even if they kept their jobs—and risked default. Indeed, prices and incomes fell 20-50%, but the debts remained at the same dollar amount. As the debtors tightened their belts, consumer spending fell, and the whole economy weakened. With future profits looking poor, capital investment slowed or stopped. In the face of bad loans and worsening future prospects, banks became more conservative. They built up their reserves, which intensified the deflationary pressures. The downward spiral sped up. This kind of self-aggravating process may have turned a 1930 recession into a 1933 depression.
Trade Decline and the Smoot-Hawley Tariff Act
Many economists at the time argued that the sharp decline in international trade after 1930 helped to worsen the depression. Some also argued that the growing body of economic intervention after 1932 contributed to the market’s inability to react to abrupt changes and kept unemployment high. The British Empire promoted trade inside the Empire; Germany promoted economic autarky in which countries received benefits (or threats) for trading with Germany.

Most historians and economists assign the American Smoot-Hawley Tariff Act of 1930 part of the blame for worsening the depression by reducing international trade and causing retaliation. Foreign trade was a small part of overall economic activity in the United States; it was a much larger factor in most other countries. [2] The average ad valorem rate of duties on dutiable imports for 1921-1925 was 25.9% but under the new tariff it jumped to 50% in 1931-1935.

In dollar terms, American exports declined from about US$5.2 billion in 1929 to US$1.7 billion in 1933; but prices also fell, so the physical volume of exports only fell in half. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. According to this theory, the collapse of farm exports caused many American farmers to default on their loans leading to the bank runs on small rural banks that characterized the early years of the Great Depression.
Federal Reserve and money supply
Monetarists, including Milton Friedman and Ben Bernanke, stress the negative role of the Federal Reserve System. It tried to help the economy by actions that effectively cut the money supply by one-third from 1930 to 1931. With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve, especially the New York branch, which was owned and controlled by Wall Street bankers. The Fed was not controlled by President Hoover or the U.S. Treasury; it was primarily controlled by member banks and businessmen and it was to these groups that the Fed listened most attentively regarding policies to follow.

Friedman argues that: “The serious fault of the Federal Reserve dates from the end of 1930, when a series of bank failures… changed the monetary character of the contraction. Prior to that date, there was no sign of a liquidity crisis—the ratio of currency to deposits was relatively stable or falling. From then on, the economy was plagued by recurrent liquidity crises. A wave of bank failures would taper down for a while, and then start up again as a few dramatic failures or other events produced a new loss of confidence in the banking system and a new series of runs on banks…. From the end of October 1930 through July 1931, nearly 1,400 banks holding $1 billion in deposits or about 2% of all deposits in commercial banks failed, the money stock declined by 6% in addition to the 3% decline up to October, and deposits in commercial banks fell by 8%…. [In August 1931] the System raised discount rates sharply….The measure was also accompanied by a spectacular increase in bank failures and runs on banks. All told, in the six months from August 1931 through January 1932, 1,860 banks with deposits of $1,449 million suspended operations, and total deposits in commercial banks fell by 15%” [A Program for Monetary Stability (1960) pp 18-19].In his book, “America’s Great Depression” Austrian Economist Murray Rothbard argues that the initial collapse of the Great Depression was simply the necessary monetary contraction that had to follow the inflationary policies of the Federal Reserve that initiated the boom of the 1920s. Rothbard further argues that the Great Depression need not have been anything more than a garden variety economic contraction but was caused to be so long because of the continual interference of the Hoover and Roosevelt Administration that continued to prop up economic dead wood (i.e. ailing/unsound institutions) through government bailouts as opposed to letting them quickly die and be replaced by healthier ones.

Economic historian Ben Bernanke pointed his finger directly to the actions by the Federal Reserve. On Milton Friedman’s ninetieth Birthday, November 8, 2002, he stated: “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry.” [3] [4] [5]
Capitalism
The revolutionary left saw the Great Depression as the beginning of capitalism’s final collapse. There was a belief that the free market was inherently unstable. However, under Hoover the market was far less free than it had been previously. Government intervention in the economy expanded greatly including high levels of spending, price controls and intervention in labour disputes. If the free market were to blame, it caused the collapse when it was weakest.
Business
Roosevelt and most of the New Dealers primarily blamed the excesses of big business for causing an unstable bubble-like economy. The problem was that business had too much power, and the New Deal was intended to remedy that by empowering labor unions and farmers (which it did) and by raising taxes on corporate profits (they tried and failed). Regulation of the economy was a favorite remedy. Some of those regulations, such as establishing the Securities and Exchange Commission which regulates Wall Street, won widespread support and continue to this day. Most of the other regulations were abolished or scaled back in 1975-1985 in a bipartisan wave of deregulation.
Public behavior
The British economist John Maynard Keynes coined the term “paradox of thrift” to describe the deepening of the Great Depression after 1929. The paradox of thrift indicates that when people decide to save more they spend less. After the stock market crash of 1929, this increased saving and reduced spending left markets saturated, contributing to price deflation, perpetuating the Great Depression. Businesses responded to less consumer spending by cutting back on production and laying off workers. With less spending on investment they were also doing their share of causing a reduction in aggregate expenditures, reducing their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The lower aggregate expenditures in the economy contributed to a multiple decline in income, well below full employment. In this situation, the economy may reach perfect balance, but at a cost of high unemployment and social misery. At the lower income levels experienced during the Great Depression, savings were much lower than before — hence, the paradox of thrift. As a result, Keynesian economists were increasingly calling for government to take up the slack by increasing government spending.

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Q: What were the five major causes leading to te great depression?
Identify and discuss at least five major causes of the Great Depression. What were the most serious social and economic consequences of the Depression?

A: The Raise of Facist government
Economic embargos causing US turmoil
Untied States Islationism
Colonsim
Imprealsim

Q: What were the causes of the Great Depression ?
What were the causes of the Great Depression? Be sure to include an explanation of misdistribution of purchasing power, lack of diversification, credit structure, the breakdown of international trade, and the Wall Street Crash of 1929 in your answer.

I have been looking for the answer but it is no where to be found! Atleast in words that I can understand =[

please help me.

A: As I read, there are many. Few Major once are over production, US Bonds with other countries, Stock market crash. I read all those from this blog: http://canadian-history.blogspot.com/2010/03/causes-of-great-depression.html

It’s funny but it also has some useful information on how other countries contribute to the grate depression

Q: What were the causes of the great depression?
what were the causes of the great depression and what exactly what was the great depression?

A: There were many causes of the Great Depression, starting with WWI, then the Spanish Flu which wiped out even more people than those lost in the war. Then in 1929, the stock market crashed. These events were in large part responsible for the catalyst of the Great Depression. You can read more about it and how it effected the people trying to survive in that time era here: http://aboutrecessiondepression.com/how-did-people-survive-the-great-depression/2009/

As for what was the Great Depression, it would probably help a bit if you understood how a recession can negatively impact an otherwise booming economy, hence the Great Depression in the 1930’s. So, you may also want to check out the following article to learn more about what causes a recession: http://aboutrecessiondepression.com/what-causes-a-recession/2009/ Hope that helps some!

Q: what are the causes of the great depression except of the stock market crash?
I need to write an essay about the causes of the great depression except of the stock market crash and I need to explain each cause can someone help me ?!?!?!?!?!?

A: The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. Many factors played a role in bringing about the depression; however, the main cause for the Great Depression was the combination of the greatly unequal distribution of wealth throughout the 1920’s, and the extensive stock market speculation that took place during the latter part that same decade. The maldistribution of wealth in the 1920’s existed on many levels. Money was distributed disparately between the rich and the middle-class, between industry and agriculture within the United States, and between the U.S. and Europe. This imbalance of wealth created an unstable economy. The excessive speculation in the late 1920’s kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the maldistribution of wealth, caused the American economy to capsize.

The “roaring twenties” was an era when our country prospered tremendously. The nation’s total realized income rose from $74.3 billion in 1923 to $89 billion in 19291. However, the rewards of the “Coolidge Prosperity” of the 1920’s were not shared evenly among all Americans. According to a study done by the Brookings Institute, in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%2. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all3. Automotive industry mogul Henry Ford provides a striking example of the unequal distribution of wealth between the rich and the middle-class. Henry Ford reported a personal income of $14 million4 in the same year that the average personal income was $7505. By present day standards, where the average yearly income in the U.S. is around $18,5006, Mr. Ford would be earning over $345 million a year! This maldistribution of income between the rich and the middle class grew throughout the 1920’s. While the disposable income per capita rose 9% from 1920 to 1929, those with income within the top 1% enjoyed a stupendous 75% increase in per capita disposable income7.

A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32% in manufacturing8. During that same period of time average wages for manufacturing jobs increased only 8%9. Thus wages increased at a rate one fourth as fast as productivity increased. As production costs fell quickly, wages rose slowly, and prices remained constant, the bulk benefit of the increased productivity went into corporate profits. In fact, from 1923-1929 corporate profits rose 62% and dividends rose 65%10.

The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge’s administration (and the conservative-controlled government) favored business, and as a result the wealthy who invested in these businesses. An example of legislation to this purpose is the Revenue Act of 1926, signed by President Coolidge on February 26, 1926, which reduced federal income and inheritance taxes dramatically11. Andrew Mellon, Coolidge’s Secretary of the Treasury, was the main force behind these and other tax cuts throughout the 1920’s. In effect, he was able to lower federal taxes such that a man with a million-dollar annual income had his federal taxes reduced from $600,000 to $200,00012. Even the Supreme Court played a role in expanding the gap between the socioeconomic classes. In the 1923 case Adkins v. Children’s Hospital, the Supreme Court ruled minimum-wage legislation unconstitutional13.

The large and growing disparity of wealth between the well-to-do and the middle-income citizens made the U.S. economy unstable. For an economy to function properly, total demand must equal total supply. In an economy with such disparate distribution of income it is not assured that demand will always equal supply. Essentially what happened in the 1920’s was that there was an oversupply of goods. It was not that the surplus products of industrialized society were not wanted, but rather that those whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income. A 1932 article in Current History articulates the problems of this maldistribution of wealth:

Q: What are some for the causes for the great depression?
I need to know what the causes to the great depression in the usa were.

A: over spending on credit
the weather and droughts(the dust bowl)
small things that caused large ripples.

Q: What are 5 main causes for the Great Depression?
What are 5 main flash points, causes, or reasons that caused/ led up to the Great Depression?

A: this site explains a bit about the great depression and you might want to check it to see if you can find what you are looking for .

The Great Depression was the worldwide economic downturn that began in 1929 and ended at different points in the 1930s. The economic events of the Great Depression are largely agreed upon and the agreement has remained essentially unchanged since study of the period began: a deflationary spiral forced dramatic falls in asset and commodity prices, dramatic drops in demand and acceto credit, and disruption of trade. However, the causes and relationship among them, as well as the role of government policy in causing or ameliorating the Depression, continue to be debated.

People have desired explanations for the Great Depression for many reasons. Debates in the 21st century about the best course of action to follow often use Depression examples (such as dire warnings of a second Great Depression if a specific agenda is not fulfilled.) Furthermore, economists trying to develop macroeconomic models use the ability to explain past events as evidence of validity.

Q: GREAT DEPRESSION?? Causes of it with tariffs?
I am doing a research paper on the causes of the Great Depression and I was just wondering (actually I seriously need this answer) In foriegn countries and here in the U.S., how does imposing tariffs and cutting down on imports force countries into a depression? I heard that they did that in Europe.

ALSO

How was the whole world brought into the greart depression?

A: Most economist agree that the depression in the US was caused by the 1929 stock market crash and bank failures it produced in an already weak economy and the resulting deflation due to inadequate monetary policy. The increase in tariffs in 1930 made only a minor contribution to the depression in the US, but a major one in Europe because they were much more dependent on trade.
Economic activity is a network of interactions and when the interactions are suddenly disrupted the economy suffers more than if they had never existed.

Q: Was INFLATION one of the many causes of the Great Depression?
Many people believe that the Great Depression was started by many different causes. Was INFLATION one of these causes, and how did INFLATION lead to the Great Depression?

A: http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm

http://en.wikipedia.org/wiki/Great_Depression

Q: What were the effects of these ( listed below) five causes of the great depression?
What were the effects of these five cause on the Great Depression:

1. Monetary policy-

2. High Tariffs and war debts-

3. Stock Market crash-

4. Over production in Industry and Agriculture-

5. Unequal Distribution of income-

I would like to know the effects these causes had on the Great Depression, thank you
no it’s not a hw assignment

A: how about your take it upon yourself to become more intelligent and learn the answers to these things and why. theres a reason you go to school. its so that you dont end up an ignorant fuck.

Q: what are the international causes of the Great Depression?
discuss te factors that led to the Great Depression of the 1930s. explain the national and international causes contributing to the economic downturn during this period. what caused it?

A: The war.

Q: What Were the Causes of the Great Depression?
I have to write an essay for my class about the great depression in the U.S and I just want to know the details about what caused it.

A: Stock Market Crash of 1929
Bank Failures
Reduction in Purchasing Across the Board
American Economic Policy with Europe
Drought Conditions

here’s the link with lots of info on each:

http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm

Q: Great Depression causes help?
of the listed causes for the Great Depression, I needed to list them in order of the greatest effect they had in causing the depression. The problem is that I’m not sure if they are right. Could you please tell me what order you think they should be in? My order was 5, 4, 3, 6, 1, 2.

1. Monopolistic pricing
2. Unregulated bank practices
3. Policies of the Hoover administration
4. Over-expanded agricultural production
5. Uneven distribution of income
6. Limited regulation of trading on the stock market

A: None of the above.

Some of them were irrelevant, others were also effects of the same factors that caused the Depression.

Speculation, overextension of banks and production in various industries – these are telltale signs of overexpansion of credit.

Ultimately that excess credit must be pulled back – rates must be increased. That is like pulling the punch from the party.

http://www.fee.org/publications/the-freeman/article.asp?aid=8132

http://www.mises.org/rothbard/agd/contents.asp

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm

http://www.worldnetdaily.com/index.php?pageId=59405

People make decisions, yes.

They make decisions based upon the information available to them.

They make economic decisions based upon the information the price mechanism provides – investors, speculators, producers of goods and services take long positions, driving asset values up, based upon the future cost of the asset and the present cost of funds. If the cost of funds is artificially low – a direct result of Fed policy – they borrow and take long positions in assets the future value of which is higher and seems secure. This drives the asset price up. If money and credit were determined by the market, this would in turn raise the cost of funds – but the cost of funds is controlled by the Fed, and if the Fed keeps the cost of funds down, then the differential, the arbitrage, actually GROWS the more people take long positions, when it should shrink.

Make no mistake, the Great Depression was not the result of “market failure” – it was picked up as a pretext by people who had always wanted to supplant State control for the free market, much in the way Bush used terrorism as a pretext to oust Saddam.

The Depression was caused by intrustion into the market and then an inept handling of the problem that resulted from that intrusion.

Q: Summarize the causes of great depression,immediate effects in europe and the U.S,and reaction to it of the gov?
What were the effects of the depression on colinial nations .Effects on Japan and China? IN what states were the most effective measures taken?
Points for best answer. Thanks!

A: Causes were the stock market crash in US, + dust bowl. Colonial nations suffered most, as these were heavily dependent on natural resources for income, and the prices of these crashed during the Depression. (More so than for industrial products.) Plus, colonies were very dependent on trade, and many countries in the depression set up greater trade barriers.

Q: What are 10 causes of the Great Depression?
What are 10 causes of the Great Depression?

A: Hi,
Save yourself some time, kid. There was only ONE cause. The Federal Reserve. They admitted as much, along w/a flip apology.

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