History Brief: The Causes of the Great Depression

History Brief: The Causes of the Great Depression


Causes of the Great Depression
The 1930s saw a prolonged period of economic difficulties known as the Great Depression.
What caused the Great Depression? Could it have been prevented?
In the 1920s, the United States was becoming the world’s leading economic nation. The European
nations had been devastated by World War I, and America was prospering. The introduction
of electricity to American homes had revolutionized day-to-day life. Electric washing machines,
vacuum cleaners, irons, radios, and refrigerators were all in high demand.
Increased advertising on radio, and in magazines, only strengthened this desire for new devices.
Advertisers were stressing to the American people that they might be the last family
on the block to have the latest, greatest product. Americans found themselves needing
items that, just a few years before, did not even exist.
Unfortunately for consumers, many of these items were too expensive for the average person
to buy. A family might have to save for years to purchase a washing machine or an automobile.
This led to the development of installment buying, or buying on credit. A consumer would
purchase an item by making a small down payment and pay off the rest of the price in monthly
installments. This allowed families to own items that they could only dream of otherwise.
Consumers weren’t the only ones buying on installment. This same method of purchasing
was being used in the stock market. Investors would purchase stocks from a broker, paying
as little as 10% of the stock’s price. As long as the stock price continued to rise,
they could pay off the balance with little difficulty. The stock itself would serve as
collateral, meaning if the stock price fell, they would lose the stock and still have to
pay off the loan. This method of purchasing stocks was known as buying on margin.
In the 1920s, more and more people were turning to the stock market as a method of making
fast income. By 1929, it was estimated that about 4 million Americans were invested in
the stock market. Many of these inexperienced investors were also engaging speculation.
This meant they were gambling financially with high risk stocks. If the stocks became
successful, it meant quick profits. However, speculating on stocks, combined with buying
those stocks on margin, could mean financial doom for investors if the stock market took
a turn for the worse.
That is exactly what happened in the fall of 1929. In the last week of October, the
stock market began to fail. Nervous investors began to sell their stocks rapidly, which
intensified the problem. On October 29, 1929, the stock market collapsed. This day is remembered
as Black Tuesday. Banks were crippled by the stock market crash.
In all, 641 banks closed by the end of 1929. More than 5,000 would close in the next several
years. Many banks might have survived, but with so many closing, Americans panicked.
They hurried to their own bank to withdraw their money, fearing it was about to shut
down. This is known as a “run on the bank”. With no money to operate with, the bank was
forced out of business. This cycle of disaster only continued. Once
consumerism slowed, salespeople were laid off. Many who worked in manufacturing also
lost their jobs or had their hours and pay severely cut. As the Depression deepened,
millions of these employees were laid off. With no income, the average citizen could
no longer afford to repay the debts they had incurred through buying on installment. Since
no one was repaying their debts, this crippled even more businesses and financial institutions.
The end result was millions more losing their jobs.

Comments

(23 Comments)

  • Prettiest Pirate

    You didn't cover everything though

  • JoesWife Smith

    At :27 "And America was prospering". It could be argued that the correct statement is that America THOUGHT it was prospering, but it was all a big bubble based on credit and speculation that could not last…. (Thanks for the vid; it's helpful)

  • Jim Turner

    This is great. Thank you!

  • TimeMaster

    This is the old "over-speculating" myth.

    Nowhere does this guy even mention JP Morgan and how he orchestrated the bank failures, which allowed him to buy up the failing banks for pennies on the dollar.

    Nor does it mention the Federal Reserve's complicity by decreasing the money supply instead of increasing it like they did before when they bailed out the banks.

  • amira alkadre

    Thanks for sharing this! People say you didn't include some information and that may be true; but the title of this video is "history BRIEF" and it's 4 min long, so it's obvious that only the main facts will be considered. Anyway, in my opinion, this video is really useful to have a main idea of what happened before going on a deep study of the subject. THANKS A LOT!!

  • BetterThanLuca

    Thanks for sharing man!!!! Got a history test tomorrow bout (the factors that led to the Great Depression ….. ) u summed it up perfectly 👍👍👍🔥

  • Max

    No mention of fractional reserve banking or the federal reserve? The risky loans would not have been made if it was not understood that the losses would be socialized.

  • Grisel Toledo

    Short, Sweet, and to the Point… Yay! Thank you

  • Mark Beaudry

    The classical explanations of the Great Depression are wholly inadequate because they don't examine the obvious that the Great Depression was a criminal act of Grand Theft perpetrated by members of the elite designed to create chaos in the international community and WW2.

  • Ray Adams

    Good, concise explanation

  • Dante Vanerelli

    is this Gibson?

  • Fouzia Waheed

    Improve your videos it’s boring

  • Brandy Nissley

    Got more out of this short video than some long documentaries. Good job, thanks.

  • Cybernomm

    Love the vid. Keep it up. Hope we dont go into another depreesion.

  • hopflower O

    I don't like the narrator's voice. It is annoying.

  • William Doyle

    ye ye mother truckers

  • Hi You

    Re les 1e11 ✌🏻

  • Switchay

    Bah alors on fait son devoir d'anglais à la dernière minute ?

  • YouYou

    1ere 6 ?

  • Trebol Clan

    This is exactly what i was looking for. My only question left is what made the stock market begging to fail?

  • Sal -

    why does he say it like great depæsæn

  • Vallarie Larson

    Yeeeeeeee

  • Nunya Bizness

    Where did you FIND this idiot who reads the script? ONE WORD AT A TIME? I'm listening at 2.0 speed and still falling asleep! Aaaaaaaaaaaahhhhhhhhh!

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