Category: Unit 2

The Great Depression is an important history that people should learn about because it teaches us an important role: money, banks, and the stock market play a role in our economy. Additionally, it teaches people to always plan ahead because anything can happen. In my research, I found multiple causes of the Great Depression, before research, I thought there was only one cause which was the crash of the stock market. 

 

My research on the causes, the responses from our president, and the consequences of the Great Depression has given me a better understanding of what happened during a crucial period in American history. What surprised me was the complicated nature of the Great Depression, with both economic and political factors that played an important role during this crisis. 

 

The research I did cleared up my confusions about the causes and the remarks our presidents gave. During the 1920s, the stock market was showing strength, as stock prices rose, people started buying shares, but the most absurd thing people did is pour their entire life savings on it, some even borrowed money from banks to buy stocks which is commonly known as buying stocks on margin. As the stock market started to decline and eventually crash in 1929, investors lost their money and those who were foolish enough to borrow money from banks, had to not only suffer from their initial investment, but ended up in debt because they needed to pay banks back with interest. The crash affected many businesses, consumers started spending less of their money because most people were in debt, the demand for goods decreased, leading to layoffs and reduced industrial production, which caused further reduced spending. Additionally, the unwillingness of the federal reserve system to supply people with more money also prolonged the Great Depression more than it should have. This all happened when President Hoover was still in office, he did so little to help out struggling Americans, although he did try to implement some steps to address the Great Depression, these were useless and ineffective. He believed that this type of event was bound to happen, therefore he made every American endure difficult times like this without caring for them. Hoover’s failure ultimately caused him to lose the election in 1932, President Roosevelt winning the election. Unlike Hoover, President Roosevelt initiated a program called ‘’New Deal’’, which created more jobs, provided reliefs to those affected, and improved infrastructure. The New Deal positively impacted the US economy and eventually brought America out of the Great Depression. 

 

It is very important for me to understand the causes and the consequences of the Great Depression because this topic will remain relevant forever. An economic decline does not just affect one country, it affects countries around the world, it also teaches me to not do risky investments. I strongly believe that the government, economists, and investors should know about the Great Depression. The government could use old strategies from the past to restore a declining economy in case something similar to the Great depression happens again in the future. To avoid another failing economy, economists should enhance their understanding on this topic in order to keep today’s economy healthy. Investors can practice risk management and make smart investment choices by studying old data because who knows, the stock market can crash again.