The Depression Essay Research Paper Depression of — страница 2

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income. A 1932 article in Current History articulates the problems of this maldistribution of wealth. President Calvin Coolidge had said during the long prosperity of the 1920s that “The business of America is business.” Despite the seeming business prosperity of the 1920s, however, there were serious economic weak spots, a chief one being a depression in the agricultural sector. also depressed were such industries as coal mining, railroads, and textiles. Throughout the 1920s, U. S. banks had failed–an average of 600 per year–as had thousands of other business firms. By 1928 the construction boom was over. The spectacular rise in prices on the stock market from 1924 to 1929 bore little relation to actual economic conditions. In fact, the boom in the stock market and in

real estate, along with the expansion in credit (created, in part, by low-paid workers buying on credit) and high profits for a few industries, concealed basic problems. Thus the U. S. stock market crash that occurred in October 1929, with huge losses, was not the fundamental cause of the Great Depression, although the crash sparked, and certainly marked the beginning of, the most traumatic economic period of modern times. The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. As the prices continued to rise, some economic analysts

began to warn of an impending correction, but they were largely ignored by the leading pundits. Many banks, eager to increase their profits, began speculating dangerously with their investments as well. Finally, in October 1929, the buying craze began to dwindle, and was followed by an even wilder selling craze. On Thursday, October 24, 1929, the bottom began to fall out. Prices dropped precipitously as more and more investors tried to sell their holdings. By the end of the day, the New York Stock Exchange had lost four billion dollars, and it took exchange clerks until five o’clock am the next day to clear all the transactions. By the following Monday, the realization of what had happened began to sink in, and a full-blown panic ensued. Thousands of investors–many of them

ordinary working people, not serious players–were financially ruined. By the end of the year, stock values had dropped by fifteen billion dollars. Many of the banks which had speculated heavily with their deposits were wiped out by the falling prices, and these bank failures sparked a run on the banking system. Each failed bank factory business and investor contributed to the downward spiral that would drag the world into the Great Depression. By 1930, the slump was apparent, but few people expected it to continue; previous financial panics and depressions had reversed in a year or two. The usual forces of economic expansion had vanished, however. Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market

system was basically unsound. The high tariffs of the Smoot-Hawley Act (1930) exacerbated the downturn. As business failures increased and unemployment soared–and as people with dwindling incomes nonetheless had to pay their creditors–it was apparent that the United States was in the grip of economic breakdown. Most European countries were hit even harder, because they had not yet fully recovered from the ravages of World War I.) The deepening depression essentially coincided with the term in office (1929-33) of President Herbert Hoover. The stark statistics scarcely convey the distress of the millions of people who lost jobs, savings, and homes. From 1930 to 1933 industrial stocks lost 80% of their value. In the four years from 1929 to 1932 approximately 11,000 U. S. banks

failed (44% of the 1929 total), and about $2 billion in deposits evaporated. The gross national product (GNP), which for years had grown at an average annual rate of 3.5%, declined at a rate of over 10% annually, on average, from 1929 to 1932. Agricultural distress was intense: farm prices fell by 53% from 1929 to 1932. President Hoover opposed government intervention to ease the mounting economic distress. His one major action, creation (1932) of the Reconstruction Finance Corporation to lend money to ailing corporations, was seen as inadequate. Hoover lost the 1932 election to Franklin D. Roosevelt. The depression brought a deflation not only of incomes but of hope. In his first inaugural address (March 1933), President Franklin D. Roosevelt declared that “the only thing we