Causes of the Great Depression
There is no one defining reason or event that caused the Great Depression. A decade of frivolous buying and poor business decisions led to this catastrophe. Also, adding in a hands off, laissez faire federal government only worsened the situation. The outcome of all of this would lead to the worst economic crisis in United States history.
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Cause #1: Consumer Culture and Buying on Credit
Popular Consumer Items of the 1920s
“To keep America growing we must keep Americans working, and to keep Americans working we must keep them wanting; wanting more than the bare necessities; wanting the luxuries and frills that make life so much more worthwhile, and installment selling makes it easier to keep Americans wanting.”- Quote from a Car Dealer, 1925
1920s Credit Advertisement
Cause #2: The Distribution of Wealth
• Rise in per capita income for top 1% of population, 1920-1929: 75%
• Percentage of American Families with no savings: 80%
• Percentage of savings held by top .1% of Americans: 34%
• Percentage of savings held by top 2.3% of Americans: 67%
• Minimum income deemed necessary for a decent family standard of living: $2500
• Percentage of American families with incomes under $2500 in 1929: 71%
• Percentage of American Families with no savings: 80%
• Percentage of savings held by top .1% of Americans: 34%
• Percentage of savings held by top 2.3% of Americans: 67%
• Minimum income deemed necessary for a decent family standard of living: $2500
• Percentage of American families with incomes under $2500 in 1929: 71%
Cause #3: The Failure of the Farms
Cause #4: Buying on Margin
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“I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
Cause #5: The Stock Market Crash
“There may be a recession in stock prices, but not anything in the nature of a crash.”
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
Stock Market Crash Images and Political Cartoons
“No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.” - Calvin Coolidge December 4, 1928