blog 3/5/2010

1. What were the main causes of the Great Depression? How are these causes similar to or different from the causes of our most recent economic downturn?

The Great Depression was a huge effect to the world economically. It was the WORST economic downfall in history. he Great Depression wasn't the country's first depression but it was the longest. There were many different combinations that caused the Great Depression.

It started when the Stock Market Crashed rapidly in 1929. 2 months after the crash stockholders had lost more than 40 billion dollars, even though the stock market began to regain some their losses back, it wasn't enough. Thousands of investors losts alot of money and most lost everything. The Stock Market Crash led us into the Great Depression.

Another cause of the Great Depression was Bank Failures. As the depression was getting worser and worser in the early 1930's, banks were beginning to fail drastically. After the crash 744 banks failed, but in total throughout the 1930's 9,000 banks failed. Most bank deposits were uninsured and so as banks were failing people just lost all their savings. The banks that were doing okay, were unsure about the economic situations and they were very concerned for their own survival so they stopped creating new loans.

The next cause was that no one was purchasing anything. After the stock market crash, people were scared that there was going to be more economic problems so people stopped spending their money. Then this led to reduction in items produced and then a reduction in peoples jobs. When people were losing their jobs they couldn't keep up with paying for items they bought through installement plans and so banks weren't extending their credit. This was a major cause because the unemployment rate rose above 25% which made the situation even worse.

Another cause was the Smoot-Hawley Tariff. As buisnesses were falling, the government decided to create the Smoot-Hawley Tariff to help protect American companies. This act was passed in the 1930's & it increased tariffs of a tax of 50% on all goods that were imported in the United States, which led to less trade between America and foreign countries. It just basically created trade wars and hurt companies.

This period was ranked as the longest and worst period of high unemployment and low business activity in the 1920's and throughtout the 1930's. I think that the causes that was going on in the 1920's don't really happen now. The only thin thats similiar to what had went on is going on now, i believe that most people are having trouble with their money. Most people are getting laid off from their jobs & people are buying new houses but are having a hard time paying off their mortages and houses are being on foreclousure and it's because of money. Overall the main causes was the Stock Market Crash, Bank Failures, Decline in purchasing goods, The Smoot-Hawley Tariff.