The Great Depression

Introduction

America has not always been on the road of success and development since its inception. It fought its way through all the rough patches during the journey of development. It was the enduring capability of American nation that enabled them to stand back on their feet and regain the strength after every tragedy and disaster, let it be economical, political or natural, and they continue to do so. The Great Depression is also America's one of the biggest economical downfalls, which resulted in mass-level unemployment.

History of the Great Depression

The dark period of economy dawned on America on October 29th, 1929, when the most lucrative sector, the stock market, which for decades had ensured the quickest and simplest way to become rich, fell prey of bankruptcy (McElvaine, p. 36). The crash of stock market thrust America in the state of utter hopelessness and despair. There was no hope of recovery for the stock market to rise again after the crash; the nation was in a dreadful state. Investors in the endeavor of sparing themselves from further demolition and devastation were trying their best to sell all stock, but all they lacked were buyers.

Causes of the Great Depression

In the mid of the decade of the 1920's, the FED decreased the interest rates in the economy to low level and this resulted in the increase of the money supply in the market. Due to the availability of funds at low cost, people started taking loans and started spending in the market. The demand and supply circle started and the sudden increase in demand caused the price levels to go up, and eventually resulted in inflation. There was an economic boom for the time being but, it was calling for a great disaster, because the demand level in the economy was constantly increasing, forcing the price levels to shoot up in the economy. It was an attempt by the FED to create a boom in the economy and boost up the production in the economy; this could have resulted in positive results if all variables had been in favor of the FED.

The people, who had powerful inside connections, knew about this, they purchased many assets through taking debts from the banks. People like this, which were termed as voracious speculators were blamed for the great depression, because at that time the interest rates were artificially low and these people had abused this factor and forced the economy to go into turmoil. The large business were borrowing at interest rates as low as 2%, when the inflation was at around 10-11%, this caused huge problems for the small businessmen and the small farmers because they could not match the increasing demand and the increasing competition in the market and they were forced to expand their business through taking loans. The greedy speculators were acting independently in the market and they were justified at their place because it made sense to borrowing, when the interest rate is at 2% and ...