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The Great Depression that started and rose to its peak in 1929 is one of the longest and most severe economic downturns of modern history. It lasted for approximately 10 long years and it negatively affected the economy of almost all the countries of the world. Homelessness, extreme poverty, declines in industrial production of goods, severe banking problems, and excrement joblessness were some of the highlights of this great depression. Among all the countries the United States was one of the most negatively affected countries. The industrialized world suffered huge losses in the US and their industrial production fell 47% and the GDP declined by 30%.
In December 1941 the US was drawn into World War II while the American economy was still suffering. This agonizing situation coupled with slow recovery is the reason why it is known as the Great Depression. In this essay, we will discuss the most significant causes of the great depression and how it got triggered in the first place.
Why Was It Called The Great Depression?
It was called so because of the serious mental health, physical health, and other severe challenges. The economic depression was the reason why all of it started in the first place. It lasted for several years and the recovery was even further delayed when the US was dragged into World War II. All of these events became the cause of the great depression.
The name that is “The Great Depression” that is given to it is just a metaphoric and figurative name as it does not follow the exact definition and specifications of depression. It is not just known as depression but the great depression because it lasted for more than a decade and left a lasting impression on people’s minds.
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What Caused The Great Depression? Factors, Causes, and Triggers – 700 Word Long Essay
You all must have heard about the great depression and how it negatively affected everyone. The US was one of the most affected victims of this great depression. One may wonder, what caused this Great Depression? “The worst economic depression of modern history“. It was not just one factor that led to this depression but a combination of local and worldwide conditions of economy, industry, banking, and a number of other events that led to this depression. In this essay, we will discuss how the great depression started and what were the most significant causes of this problem.
Here Are The Top 5 Most Significant Causes of The Great Depression
Following are the five most significant causes that led to the great depression.
1) The Stock Market crash of 1929
The share market was growing at a good pace in the US. Almost everyone invested their money in the stock market to make easy money, many people even sold their properties to invest in the stock market to earn more profit. In the year 1929, the market hit its peak profit value and almost every investor was making good profits until the 24th of October 1929 when the market opened at 11% lower than the previous day.
From Thursday to Monday the stock market fell so much that a wholesale panic situation started to set in. All investors as well as the general public all started to sell their shares from the stock market until there were literally no buyers at all in the whole market.
“The Whole system fell back on itself like a house of cards,” Mitnik said in an interview. From 1929 to July of 1932 the stock market lost a whopping 85% of its value. This was one of the most significant causes of the great depression.
2) Bank Failures
The banks were very irresponsible about lending money to the people. The liquid cash reserves in all the main banks fell significantly low. At the start of the depression, people panicked and rushed to take all their money out of the banks but there was no liquid cash available in banks. There were very long queues outside banks and people waited for hours to get their cash. Availability of no liquid cash was one of the reasons why the purchasing power of every American declined so much that they became unable to afford basic necessities of life like food and shelter.
Many people lost their jobs, there was the widespread unequal distribution of wealth, American economic policy failed, the unemployment rate increased, the economic downturn rose, the economic crisis took over. and the great depression was caused.
3) Oversupply and Mass Production Problem
Overproduction because industries started producing more than what was required. As a result, the industry owners sold their goods at a very low price that didn’t even cover the initial cost price. The industries were already suffering from heavy losses before the market crash of 1929, after the crash, the economic downturn became much more severe. Factories of the united states of America shut down and people started suffering from joblessness. The halt in production also gave rise to a scarcity of resources that further led to a shortage of food.
Farmers that bought machinery on debt also started facing a crisis situation as they were unable to pay off the debt because of the mass production problem. For farmers, depression was the worst as it forced them to face a food crisis situation that caused many deaths.
4) The Great Drought
The depression wouldn’t have been named the great depression if there was no drought situation immediately afterward. The long years of devastating crisis and the agonizing situations in almost all aspects of life made this depression this bad. Many important events took place and the great drought was no different in causing the great depression.
The worldwide economic problem was the reason for the failure of the stock market in 1929. Because of this economic depression, the farmers did not use any soil preservation techniques while planting crops which resulted in a year-long drought. Because of bad environmental conditions, massive dust storms came and choked whole towns, this devastating environmental catastrophe is known as The Dust Bowl. Thousands fled the region and the whole economy collapsed.
5) Joblessness
After the New York stock exchange collapsed the country’s economy suffered a devastating blow. More than a million people lost their jobs. Almost everyone lost their jobs and until 1930 only people with their own farms were left with farming jobs. The widespread unemployment rate and joblessness gave rise to serious physical and mental health problems. According to stats, the unemployment rate exceeded 20% when the economic depression was at its peak.
FAQs
What were the main causes of the Great Depression essay?
The main causes of the great depression were the fall of stock prices, failure of the banking sector, joblessness, imbalance in demand and supply, and scarcity of resources.
What were the causes of the Great Depression 5 paragraph essay?
To write the causes of the great depression in a 5 paragraph essay for school and college students you should address one topic in one body paragraph. Start your paragraph with a topic sentence and then move on with your explanation.
Why The Great Depression is Called the Great Depression?
It is called the Great Depression because of the extremely agonizing situation in every walk of life that lasted for almost a decade. The physical and mental health of every person got affected and almost everyone suffered huge financial losses.