Great Depression

The Great Depression was the worst economic collapse in U.S history. The depression started in the U.S but people all over the world were affected by it, especially in Europe, Germany, and Great Britain. The reasons that lead to the Great Depression are still being debated. There are a few reasons that historians and economics have agreed on. The main event cited in common knowledge and by historians is the crash of the stock, wealth distribution, and the Smoot-Hawley Tariff

In the 1920s the economy had been growing because it was considered as a technological era. Inventions such as radio, automobiles, telephone were being used by people. Since the economy was doing well people had money to spend. People from all classes began investing in stocks as a way to make quick money. As more people invested in stocks, stock prices rose higher and higher. Alot of people even invested all of their savings in the stock market. Others borrowed money or took out loans from the bank. The result was an investment of billions of dollars into the US stock market. According De Grace in Stock market crash of 1929 causes, effects and timeline a reason for the stock market crash was margin buying. Investors were paying 10% of the total value of the stocks at the time of buying and the rest of it in installments. The stock market could not handle such a huge amount of money borrowed. (Para 3,2011)

The money that was distributed between the rich and the middle class had a very huge gap. The economy produced more goods than people could purchase because a lot of the people did not have enough money. With the stock market crash people from all classes stopped purchasing items. This then led to a decrease in the number of items produced and thus a reduction in the workforce. People lost their jobs because companies were not making money therefore they could not afford employees, so they would let them go.

Due to people being out of work they were unable to keep up with paying for items they had bought through installment plans. More and more inventory began to accumulate. According to Gusmorino in Main Causes of the Great Depression “in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%. That same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of Americans had no savings at all” (para 2, 1966). This means people that earned less spent less because they had no savings in return. The weathy got wealthier and the poor got poorer. Wealthy people used their wealth to become head of businesses or politics so all the polices that were created were created to benefit the wealthy and not the poor.

Since many banks had also invested large portions of their clients' savings in the stock market, these banks were forced to close when the stock market crashed. When people saw that a few banks close it caused a panic frenzy throughout the United States. People were afraid they would lose their