THE GREAT DEPRESSION

The Great Depression



The Great Depression

Introduction

Great depression represents the chronic worldwide economic collapse that preceded the World War II. It was found to be the longest and deepest downturn of the twentieth century. The severe slump was occurred in the late 1929. It was mainly originated in the United States and rapidly entrapped the Europe and then the rest of the world. It happened after the stock market crash. This Great Depression became the cause of devastation of many countries across the world which badly affected personal income, employment, profits, and international trade. The world trade of Britain fell in half during 1929-1933, employment plunged into every sector that was recorded around 3.5 millions, and the great fell in output observed in all of the industries. GDP during that time fell by about 10%.

Discussion

Interwar Great Depression Events

The United Kingdom faced a chronic depression after the World War I which remained through the World War II. There are a number of events which led the United Kingdom towards the large as well as persistent depression right after the World War I. it served as the cataclysmic because it contains various storms of events that created one persistent great economic downturn.

Crash of the Wall Street stock market: The major event that primarily led the world economy was the crash of the Wall Street stock market in October 1929. That substantial collapse occurred due to the decline in the production, income and prices which contributed much towards the crash. The great magnitude of the depression was observed in US.

Debt Deflation: Debt deflation happened because during that period bank lent out more money than it supposed to lend. As a result of this, when the stock market crashed, the bank called the brokers to pay back loans, but that loaned amount could not be paid back. Therefore, this incident greatly affected the bank as debtors defaulted on debt. The governments as well as Federal Reserve banking regulations were ineffective at that time, and they could not prevent such panic. This failure causes the loss of billions of dollars. This situation also contributed towards the devaluing of the currency. At that time people were experiencing a great deal of losing their jobs. This led towards the debt liquidation and the contraction of money supply. This entire haphazard situation extremely slowed down the whole economy.

A fall in asset prices: This market crash down led the industries towards the fall of net worth of business. As a result of this, economy faced a number of issues such as bankruptcies, fall in profits, reduction in trade, increased un-employment, decline in outputs, hoarding of money and a great rise in deflation and interest rates.

Presidential Blunders: The bleak reality of government's role during that time was devastating. The presidential blunders led the economy to the severe chronics as the government tried to restrict the flow of foreign goods through the Smoot-Hawley Tariff Act. This act restricted the foreigners to buy the over-priced goods and that resulted in ...