A depression is an extreme financial downturn whose effects are experienced for an extended period of time. The Great Depression refers to an important part of American history characterized by extremely difficult economic times. During this period in the US, there was mass unemployment, large numbers of people living in poverty, and a high rate of business failure.
It is believed that Black Tuesday was a major contributing cause of the Great Depression. Black Tuesday refers to 29 October 1929, when people sold millions of shares of stock to a market that had an insufficient number of buyers. Much of the money that was used to purchase those stocks had been borrowed from banks. The result was a stock market crash that helped send the US into an economic crisis.
Although the stock market crash was a major factor, it was not the only cause of the economic disaster. The way was paved by a number of things, and history shows that the economy had begun to shrink before 29 October. The government had allowed monopolies to form, and mass production led to saturated markets at a time when the people who had money were weary of spending.
The hard economic times meant businesses were destined for big problems. Many could not survive. Industrial revenues dropped significantly and farm revenues were reduced to nearly half of their pre-depression totals. This resulted in loan defaulting on an even larger scale.
Among the businesses that failed during the Great Depression were more than 1,000 banks. When these financial institutions died, large numbers of people lost their savings. This happened during a time when one quarter of Americans were unemployed and when employed individuals’ salaries were significantly reduced. The banks’ failure was caused in large part because people acted as they had with stocks: fear drove people to want to withdraw their money on a mass scale, which resulted in cash shortages.
President Herbert Hoover and the Republican Party received a lot of the blame for the economic crisis. As a result, in 1932, a Democrat was elected to the White House. The new president, Franklin D. Roosevelt, and his administration rolled out many social and economic programs that were designed to provide relief and initiate reform.
Despite these immediate efforts by the new administration, it is World War II that is credited for improving the US economy. The war initiated massive government spending, which pumped money into the economy. This spending also created jobs and helped to boost wages.