The Great Depression was the worst economic depression in history of the United States. However, many people in this day and age do not know what caused it. The fact of the matter is that there were many causes of the Great Depression, which were both domestic and international in nation.
According to economists and historians there are top 5 causes for the Great Depression, which affected not just America but also the world. The Great Depression was the direct cause for the rise of extremism in Germany, which ultimately led to World War II.
Top 5 Causes Of The Great Depression:
• The stock market crash of 1929 -- Many people believe that the stock market crash on October 29, 1929 is the same as the Great Depression. However, the crash was one of the major causes of the Depression, and 2 months after the crash, it is estimated that stockholders lost more than $40 billion dollars. Although the market regained some of its losses by the end of 1930, the gain was not sufficient to prevent the economic downturn.
• Bank failures -- In 1930, more than 9,000 banks failed and closed shops. All bank deposits during that time were uninsured and people ended up losing their entire life's savings. The banks that survived closure and failure stopped giving credit and as a result business started failing, and people also had less money to spend.
• Declining is purchase -- With the stock market crash, fears were abound that further economic problems were round the corner so people just stopped spending money and purchasing items. This led to a reduction in production, which in turn led to layoffs. The entire incident became a vicious cycle because as workforce was reduced, people did not have enough money to spend and banks were not extending credit.
• America's economic policy with Europe -- As businesses in America started failing, to protect American companies, the US started charging a high tax on imports. This resulted in less trade between the US and the European countries along with economic retaliation tactics.
• Drought in Mississippi Valley in 1930 -- Although not a direct cause of the Great Depression, the drought created havoc among the farming community. The farmers had no money to pay their taxes or other forms of debt and were forced to sell their farms and move to the city looking for jobs. Many farmers along with their families lived on charity and were unable to find jobs to provide for themselves and their families.
About Author: Pauline Go is an online leading expert in finance industry. She also offers top quality finance tips like :
Payday Loan Tips, Bond Funds With Highest Returns, Tax Write off List
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