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Economical Events That Lead up to the Great Depression

Essay by   •  August 22, 2010  •  Essay  •  613 Words (3 Pages)  •  2,356 Views

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In the 1920's, things were really rocking in the US and around the world. The rapid increase in industrialization was fueling growth in the economy, and technology improvements had the leading economists believing that the up rise would continue. During this boom period, wages increased along with consumer spending, and stock prices began to rise as well. Billions of dollars were invested in the stock market as people began speculating on the rising stock prices and buying on margin.

The enormous amount of unsecured consumer debt created by this speculation left the stock market essentially off-balance. Many investors, caught up in the race to make a killing, invested their life savings, mortgaged their homes, and cashed in safer investments such as treasury bonds and bank accounts. As the prices continued to rise, some economic analysts began to warn of an impending correction, but the leading pundits largely ignored them. Many banks, eager to increase their profits, began speculating dangerously with their investments as well. Finally, in October 1929, the buying craze began to dwindle, and was followed by an even wilder selling craze.

The Great Depression was the worst economic slump ever in U.S. history, and one, which spread to virtually the entire industrialized world. The sock market crash was the start of an economical downturn. Numerous people bought their stocks on margin. They also purchased stock with borrowed money. When there was a drop in the stock market, some panicked and sold their stocks, for much less then they were originally worth. When people bought their stocks on margin, they only had to pay 10%. The stock became worthless and people went in to debt, because they had no money to the banks.

Consequently industries such a farming, mining, textiles, and construction to have financial problems. Therefore businesses were not able to pay their debts, hundreds of banks failed. Many depositors withdrew their money savings; millions of people lost their entire live savings.

Commentary:

Looking back over the drastic economic events that took place during the depression there were that might have been used that might not have prevent the depression but might have loosened the impact that took place.

One way that might have prevented the mass hysteria would have been, to put a limit

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