The Great Depression in the USA

28. The Great Depression in the USA

Main causes and consequences of the Great Depression

• Causes:

  • Raising popularity of the New York Stock Exchange (Wall Street)

  • In the 20’ you could have bought shares on credit and made money this way

  • Many people borrowed huge amounts of money from the banks, to buy shares “on the margin”

  • Fall 1929: the urge to buy shares became a sort of fewer and prices went up

  • The companies weren’t producing that much profit – people/investors started to slowly sell their shares

  • More and more people sold their shares – the prices of shares were falling unstoppably

  • Black Thursday, Terrifying Thursday

• Consequences

  • By the end of 1929 the value of all shares had dropped by 40.000 (dollars)

  • Thousands of people, mostly those who borrowed to buy shares “on the margin” found themselves in a huge debt, often without job or even homeless

  • People decided to rather save the money than spending them on new gadgets (cars, radios…)

  • American factories were already overproducing by that time, but now even less people wanted to buy their goods

  • The factories had to dismiss many workers, which resulted in huge unemployment

  • At that time people had become no social help from the state – homelessness

  • All were suffering – people, workers in the cities, farmers on the countryside…

  • The call for help and solution from president Hoover was getting stronger

  • He had only promised, but not taken any action

  • New president Roosevelt was almost unanimously elected, after promising a “New Deal”

Black Thursday

• On Thursday – October 24th, 1929, the panic unleashed and people sold over 13 Million of shares

• This day was later known as a “Black Thursday”

• On the following Tuesday – October 29th 1929, other 16, 5 Million of shares were sold, that is known as the “Terrifying Tuesday”

Roosevelt’s New Deal

• The main idea was that the federal government should take the lead in the fight against the Depression

• He set up many government organisations, so called “agencies”

  • The Civilian Conservation Corps found the work for many young men

  • The Federal Emergency Relief Administration gave money to fight against unemployment and homelessness

  • The Agricultural Adjustment Administration…

• This had helped many people not just regain their jobs, but also their confidence, they again owned possession, had independence and self-confidence

• Despite that, many people feared losing their jobs again, many thought the Deal is just a drainage for the economy, or that it is ‘too soft and planned’

• 1939 around 10M people were again without their jobs

• What helped to start the economic 100% again, was the WW2 in Europe, because the USA became the no. 1 supplier of the weapons for the Allies