The Great Depression

The Depression was a period of time after the economic boom of the 1920's in America, when the economy went downhill. People lost money, jobs, shares, businusses went bankrupt and the farming industry suffered greatly. The Republic Government at the time lead by Hoover was still following policies of Lassez Faire so business was not getting the support it needed to get it back on track.

The Republic Governments Protectionist policies were one of the causes of the great depression. There were trade problems associated with their protectionist policies. The Republic Government made high tarrifs on imported goods. This was to make sure that the Americans were buying their own products. Buying American products meant that they would be keeping the money in their economy instead of sending it to other countries. Other countries, now unable to export goods to the Americans retaliated by increasing their tarrifs on american goods. America could no longer export their goods to other countries. Mass production meant that there was more goods being produced than what needed to be but because other countries had high tarrifs on American goods, they could not be exported. Output became greater than demand so goods cheapened in price. American goods were not being sold. This resulted in cut-backs in production which meant that there was less employment available so people lost their jobs. Profits being made lessened and so did the value of shares.

A lack of regulation in the stock market was also a cause of the great depression. Most shares that were changing hands were done so through borrowed money. Buying shares on the margin this way worked very well when share prices were rising. When prices began to slow down or cheapened in value however, trouble arose in the stock market. Seventy five per cent of share prices could be borrowed. This caused a lot of speculation which helped to increase share valuse further. The Federal Reserve Board gave easy credit to share holders and taxes were cut so that more money was available. This lack of regulation created more speculation which caused more share prices to increase.

The farming problems in the United States increased and were one of the causes for the depression. Because of mechanisation there was over production of goods by farmers. There were large surpluses of food. It could not be exported because of high tarrifs on American goods in other countries. As a result of this surplus American goods cheapened. Farmers began biorrowing mortgages because of low interest rates. The Farmers found that they could not payy of their mortgage debts and got evicted from their residences and farms as a result. Workers lost their jobs because the employees were no longer in control as they had been evicted because they couldnt pay off debts.

International Debt was another cause of the depression in the United States. The United States was still being effected by International trends. Even though the US was going through a stage of prosperity, the International economy was still recovering from war. There were war debts that needed to be repaid

to other nations. There were reparation repayments that needed to be paid

because of the effects of the war. Also the depression and inflation of Germany which was Europe's largest economy had an impact on the economy of the United States.

The Wall Street Crash was a trigger for the collapse of the United States economy.On Tuesday the 24th of October lots of inverstors tried to sell their shares at once. this made share prices drop very fast. by the end of the day the stock exchange had lost four billion dollars. Many of the stock brokers sold shares on margin. To buy shares to begin with they had to borrow money from the banks. when the stock prices began falling the brokers needed to repay their debts to the banks. the only way to do that was if their customers paid

them back. the customers had to sell their shares to pay the brokers back and they were desperate so they were selling for any price they could get.

Hoover Reacted to the Depression in a number of ways. the first was through volunteerism where he asked large business to keep their wages the same and keep the same level of employment. Hoover also cut tax by $160 million. He convinced congress to lend him $423 million for public works projects to help with unemployment. Hoover later encouraged congress to pass The Agricultural Marketing Act which would lend $500 million to help farmers. He increased tarrifs on goods from other countries to keep the money in the American