The Primary Causes of the Great Depression

2021-05-06 17:02:23
6 pages
1601 words
Type of paper: 
This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The Great Depression in America got signalled by the crash on the New York stock exchange that took place in October 1929, and it marked the worst economic crisis ever in the America history. The primary causes of the Great Depression included the unreliable banking system. There were about twelve thousand business banks in America in 1900 and by 1920, the number had ascended to thirty thousand. With less banking supervision numerous one-office banks had opened in agricultural zones, utilizing just a small amount of capital where sometimes it was as little as six dollars. However, due to high production in U.S. farm products and tumbling crop costs, agriculturists were not able to make loan payments to these local banks and bank failures resulted leadingto the Depression. Numerous bank failures between 1921 and 1929 happened in societies of a quarter century or fewer occupants and with capital subsidies of twenty-five dollars or less (McNeil et al., 2016).

Also, the banks that did not get smashed by the struggling agricultural industry began competing for deposits. The individuals and the businesses had to pay higher rates to triumph the deposits. On the other hand, the banks also needed to cover up the high rates paid out to the customers by making more income from the interests they charge on loans. They thus made loans available to their customers but by the end of a decade, the customers and the businesses were unable to keep up with the payments on the loans (McNeil et al., 2016). The banks were then forced close their doors due to lack of funds from loan repayments which contributed to a massive slide in the U.S stock market hence resulting in a Great Depression.

Another factor that led to the Great Depression in America was a docile Federal Reserve System. The system controlled the loaning of money to banks by raising and lowering the interest rates. The bank had less money to loan to the investment brokers if they borrowed less and in return the brokers would have less to loan out to the individual investors who wanted to buy the stock on margin. In 1929, the system had opted not to increase the interest rates but instead warn the bank to reduce the amounts they loaned for stock speculation. The banks, however, had ignored the system since it carried no penalty. The banks then continued lending to investment brokers, hoping stocks would rise. The investment brokers also went on lending to the general public to invest in stock. The public then bought the stocks on margin. The Federal System then meekly backed down allowing the speculation to continue and when the market crashed, the investors did not have the ability to pay the brokers and the brokers would not pay the bank interest on their loans leading to a big fall on the banks.

The overproduction in manufacturing was another component that prompted Great Depression in America. Producing had moved along at a high speed and by 1929, the distribution centers and stores were bulging with products. It was because of the mechanical production systems and the machinery that had supported production. With the introduction of the higher purchase price where the merchandise would get purchased in instalments, there were high production and high sales. By 1929, the hides away developed gigantic inventories of products and had quit requesting from the industrial facilities. Purchasing power went down, but the producers had overproduced and started decreasing.

The companies began reducing the number of workers even before the stock market crash. Numerous individuals thus lost both their jobs and even savings (McNeil et al., 2016). The goods remained on the shelves of stores and warehouses. The manufacturing sector got brought down to a halt, and numerous individuals laid off as a result thus bringing down the American economy and leading to a Great Depression.

B) Ways in which the new deal used to address the problems of the great depression.

The Supreme Court administrated the governments method of taxation unlawful and scrapped the AAA program. The government then developed the Soil Conservation and Domestic Allotment Act of 1936 in its place where it rewarded farmers to allow portions of their lands to lie uncultivated or to plant soil conserving crops such as beans or buckwheat in part of their acreage (Reiman, 2010). It was then followed up by the second Agricultural Adjustment Act that had an objective to support the farm prices and restore farm income to be at far with the incomes of other segments of the society.

Also, since America had suffered the highest unemployment it had never had in the history of the nation, another pressing new deal that was basic to Roosevelt when he took over the office was to get people back to work. The first step he made was to make an appeal to the Congress of the Unemployment Relief Act, which established the Civilian Conservation Corps (CCC). In its existence, the CCC employed some 3 million youths on the conservation ventures like flood control, draining swamps and tree planting.

Apart from earning the salaries for themselves, the CCC employees portion of their salary got send to their parents, and so the benefits got spread to their families and ultimately to the economy thus reviving the great Depression in America.

The new deal also considered the farmers. The farmers and the landowners were anxious to get some support. The Agricultural Adjustment Act (AAA) and the Home Owner Loan Corporation gave millions of dollars in loan support so that the households could keep their homes and ranches (Reiman, 2010). Also, the mortgage-holding banks got saved tremendous loss and even collapse in some instances with mortgage holders reviving to get the capabilities to make their payments. As with the CCC and FERA, these loan assistance agencies were for both instant relief and extensive-term recovery.

How the end of World War II contributed to the rise of cold war tensions.

The effects of the arms race on the rise of the cold war

The arms race denotes a faster increase in the quantity and quality of instruments of military power by the rival states peacetime. It had a significant impact after the World War II and led to the increased cold war tensions since the build-up of the arms characterized the cold war between the U.S and the Soviet Union, whose stakes changed by the development of the nuclear weapons.

How differing ideologies led to increasing in cold war tensions

The distinct differences in the ideas between the United States and the Soviet Union prevented them from reaching a mutual understanding of the critical policy issues and even as in the case of Cuban missile crisis, led to the brink of the cold war (Leffler &wastad, 2010). The government of the U.S got hostile with the Soviet leaders for taking Russia out of World War and got opposed to a state ideologically based on communism. The hostility to the difference in the idea of taking the Russia out of war increased the tension in Cold War.

The effects of cold war tension between the American culture and domestic policies

The cultural battles between the superpowers had much impact on the everyday lives of the numerous Americans civilians than other aspects of the cold war. The national agencies encouraged the Hollywood to produce the anti-Communist movies and urged that the film scripts get changed to remove references to less than exemplary aspects of American History as a propaganda tool (Dudziak, 2011). The films even encouraged the discriminations among the Americans and the Soviet Union.The result was a litany of movies that had helped spark patriotism but also raised suspicion of communist in America. Most communists got rooted out; numerous lives got based on weak evidence, unsubstantiated accusations, and peoples refusal to take in the hearings or answer questions. Most of these individuals got fired, blacklisted, and had their civil rights violated on these claims. . Another form of discrimination got demonstrated by the police. They exercised brutality against black motorists

Changes that came about as a result of the following historical events

Civil right movements- It got marked with the expansion of civil liberties and rights in the America. The movements also led to what could get considered as the birth of a new nation which came as a consequence of the many protests held at the time.The movement thus yielded freedom in the country. The first civil rights got passed, and the opposition towards the Vietnam War kept the nation in an excited state. Also, during the civil right movements, the legislation got passed. There was the establishment of the right to vote. The right to vote got passed, and it got considered as the most successful piece of civil rights legislation ever adopted by the Congress (Thelin, 2011). No person could get denied the right to vote on account of the race or colour. During the period, there werediscriminations, especially from the police. Some individuals got denied the rights to vote and the movement succeeded in establishing the Voting Right Act that ensured all people vote regardless of the race or colour.


Leffler, M. P., & Westad, O. A. (2010). The Cambridge History of the Cold War (Vol. 1). Cambridge University Press.

Dudziak, M. L. (2011). Cold War civil rights: Race and the image of American democracy. Princeton University Press.

McNeill, Richard C. Hanes, and Sharon M. Hanes. (2016). Great Depression and the New Deal Reference Library. Ed. Allison.Vol. 1:U.S. History in Context. 25 Feb. 2016.

Reiman, R. A. (2010). The New Deal and American Youth: Ideas and Ideals in a Depression Decade.University of Georgia Press.

Thelin, J. R. (2011). A history of American higher education. JHU Press

Have the same topic and dont`t know what to write?
We can write a custom paper on any topic you need.

Request Removal

If you are the original author of this essay and no longer wish to have it published on the SuperbGrade website, please click below to request its removal: