Jun 252012
 

what was the cause of great economic depression If you are willing to dive into history class for some time, then let us get right on to some information regarding the causes of Great Economic depression.

One of the reasons why the great depression has been a talk of talks even today is the magnitude. The scale at which its effect was felt and the duration for which it sustained surely arises interest in knowing more about it. Yet, it so happens that though we seem to “know” about the great depression, most of us still don’t know what really caused it.

So far, the great depression happens to be one of its kind and worst in the magnitude. For such reasons, economists and historians kept their eyes sharply on the facts related to it and deduced the reasons that corresponded to such a jolt to the US as well as other economies in those days.

Basically, this international phenomenon was a result of extremism in Germany and it eventually led to another worst event; World War II.

The beginning was crashing of the stock market in the year 1929. It is shocking to know that the loss reached up to $40 billion within 2 months of the downfall and many stockholders suffered this loss. Indeed, the next year, there was some gain but not enough to restore the situation and thus, it all led to economic depression.

When the crash happened, people stopped buying stuff. The main reason is speculated to be a possibility of lower rates. The purchasers were waiting for prices to fall down more and hence, they kept waiting. This led to a decline in production quantity, therefore, resulting in reduced employments, dismissals of existing workers and no new jobs availability.

Next came bank closures. Banks were not willing to extend credits of their clients. Due to no insurance on bank deposits, depositors ended up losing all their savings and earnings. No less than 9 thousand banks ended up closing down and going out of business. Those that endured the closures did not give credits anymore and people soon suffered weak businesses and downfalls.

Mississippi Valley drought of 1930 may not be a direct addition to the great depression, but it sure had its own contributions. Lastly, the policy of US with Europe, imposing huge taxes on imports, resulted in a decline in trade as well.

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