During the 1920’s America was hit with a time of poverty and despair, later to be known as the Great Depression. It’s hard to pinpoint what exactly caused this worldwide depression but there were many contributing factors, such as the lack of diversification, the poor credit structure of the economy, and the unstable international debt structure. Economists argue that if the government implemented more structure these causes could have been avoided, but no amount of government support could have stopped the economic decline. Before the Great Depression only certain industries controlled the wealth in America, essentially the construction and automobile industries. Relying so heavily on just certain industries increased the chances of sending America into an economic downfall. As the construction and automobile industries began to decline in the late 1920s, so did America 's economy. Most of America’s money was being revolved and invested into only certain industries, instead of being distributed so that if that one industry went under the whole economy wouldn’t go with it. Automobile sales dropped tremendously during the first nine months of the 1929, sending America’s economy into a downfall. Despite this, other industries tried to emerge and compensate for the loss of revenue on the economy, among them were chemicals, petroleum, plastics, and electronics. The decline of these industries resulted in unemployment rates to double, due to layoff or pay cuts of most workers after these industries could no longer afford to pay workers. Some companies started to take out loans in order to keep Americans working, but these loans just ended up hurting the economy rather than helping it. The uneven distribution of wealth in essence created the unequal sharing of riches between industry and agriculture, resulting in
…show more content…
President Herbert Hoover’s reasoning behind the depression was due to Americas the international economic situation. As a result of World War 1 the international economy was weakened, and only functioned as long as American banks exported enough capital to allow European countries to repay their debts to America and also continue buying American goods. On the other hand it was almost impossible for European countries to repay our banks without their own economy going bankrupt. Rather they relied on payments from Germany and Austria to cover their debt, even though they would never get reimbursed because Germany and Austria were in worse debt than anyone else. Late in the 1920s American companies began to slow down production, they reduced their purchases of raw materials and supplies from Europe; a result many European economies were weakened. Foreign countries were unable to pay back the debt because America stopped purchasing over sea products. The Hawley Smoot tariff of 1930 imposed rates to increase significantly, which angered foreign governments. They retaliated by creating their own trade restrictions, adding to the limitations on American goods, especially on agricultural products.
Even though the collapse of the stock market in October 1929 is considered to have triggered The Great Depression, it alone was not responsible for the economic decline; it merely revealed the underlying causes and let them play out. The main causes of the depression were the lack of diversification, the poor credit structure of the economy, and the unstable international debt structure. The Great Depression was bound to happen, with all these factors playing a role at the time there was no other possible
President Herbert Hoover’s reasoning behind the depression was due to Americas the international economic situation. As a result of World War 1 the international economy was weakened, and only functioned as long as American banks exported enough capital to allow European countries to repay their debts to America and also continue buying American goods. On the other hand it was almost impossible for European countries to repay our banks without their own economy going bankrupt. Rather they relied on payments from Germany and Austria to cover their debt, even though they would never get reimbursed because Germany and Austria were in worse debt than anyone else. Late in the 1920s American companies began to slow down production, they reduced their purchases of raw materials and supplies from Europe; a result many European economies were weakened. Foreign countries were unable to pay back the debt because America stopped purchasing over sea products. The Hawley Smoot tariff of 1930 imposed rates to increase significantly, which angered foreign governments. They retaliated by creating their own trade restrictions, adding to the limitations on American goods, especially on agricultural products.
Even though the collapse of the stock market in October 1929 is considered to have triggered The Great Depression, it alone was not responsible for the economic decline; it merely revealed the underlying causes and let them play out. The main causes of the depression were the lack of diversification, the poor credit structure of the economy, and the unstable international debt structure. The Great Depression was bound to happen, with all these factors playing a role at the time there was no other possible