The of the United States financial institutions were failed

The
Great Depression of 1928

Introduction:

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                                     The great
depression was the serious financial downturn in the historical backdrop of
industrialized world that began from 1929 and kept going until about 1939. It
was the longest, most profound and widespread depression experienced ever by
the western industrialized world. This depression may said to have began with
the catastrophic collapse of stock market prices on New York stock exchange on
October 24, 1929 which cause the Wall Street into a panic and traders sold $12.9
million of shares in one day which also known as Black Tuesday . Over the next three years stock market prices
continued to fall. The following table shows the considerable decrease of stock
prices throughout the period.

 

High Price
Sep 1929

Low Price Nov 1929

American Can

181

86

American Telephone &
telegraph

304

197

Anaconda Copper

131

70

General Electric

396

168

General Motors

72

36

Montgomery Ward

137

49

New York Central

256

160

Radio

101

28

Union Carbide & Carbon

137

59

United States Steel

261

150

Westinghouse E & M

289

102

Woolworth

100

52

Electric Bond & Shares

186

50

                       Source:
Frederick lewis, Allen, Only yesterday, pg241,

          In 1932 the dropped investment and consumer
spending caused steep decline in industrial output around 54percent of its 1929
level which forced companies to laid off their worker. In 1933 around $15
million Americans were unemployed and half of the United States financial
institutions were failed when this depression reached its lowest level. This
great depression was began in United States of America but quickly turned into
the world wide western economic countries.

 

Impact
& Causes by the great Depression

        This depression caused many farmers to
lose their farms at that time, years of over cultivation, and the drought
created the “Dust Bowl” in the
Midwest. It ended the agriculture in a previously fertile region. Thousands of
farmers and other unemployed persons look to work in California. Many ended up
living as homeless persons others moved to shantytowns called “Hoovervilles”

During the great depression the
presidency of United States (Herbert
Hoover) is also crippled which led to the election of new president Franklin D Roosevelt in 1932. Who
promises the nation of new deal and he becomes the nation’s longest serving
president. The economic dip wasn’t just confined to US but it also effected
much of the developed world. In Europe the Nazis get the power to came in
Germany which began the WWII. Following are the causes of the great depression
in details.

1.  
The Stock
Market Crash of 1929

 

On Thursday
October 24th 1929, market plunged at the opening bell, a record
shares were traded around $12.9 million which is also known as “Black Thursday” then after five days
on 29th October around $16 million shares were traded after the
another panic wave swept the Wall Street making the worthy shares ends like a
worthless and those investors who bought shares by borrowing money after two
months they were wiped out by losing $40 billion of investments. As consumers
confidence lost by this market crash, the dip of spending and investment lead
to industries and businessman to slow down their production and began firing
their personnel and who remained hired their wages change into cut down. This
increased the unemployment ratio in United Stated by half of the workforce. Even
though a number of losses regained by the market by the end of 1930, but the
economic system was devastated and United States of America simply entered
which is called the Great Depression.

 

2. 
Failures of
Banks

When
the stocked rippled the whole economy in 1930 the first wave of banking panic
began and large number of investor lost the confidence on their bank and
demanded their deposits in cash. Second wave came in 1931 when more then 3000
banks were collapsed and people lost their money after this wave more peoples
panicked and they withdrew their money and put it under their mattresses
forcing more banks to shutdown and by the end of these waves more than 9000
banks had failed that further decrease the money supply. The fed didn’t put
enough money circulation to get the economy growing again instead they allow
the US dollar total supply to fall 30 percent.

3. 
Economic
Factor

 

During
the Depression the economy of the country shrank 50% in the first five years.
In 1929 the output of the economy was $105 billion, as measured by GDP. In 1930
the US raised the tariffs up to 50% on imported goods to increase the demand
for domestic products. However increasing the demand of domestic items it
creates unemployment in abroad as the factories shut down and economy again
shrank another 8.5% of GDP, then in 1931 it again fell 6.5% and then 12% in
1932 the country had faced 5 years contractions.

The
new deal boosted the GDP growth to 10.8% in 1934 and its going up for next three
years until in 1938 the government cut the new deal and the depression return
causing economy shrank 3.3%. But the WWII preparations boost the economy up to
8% in 1929 and 8.8% in 1940. Next year Japan bombed Pearl Harbor, and the US
entered the WWII. Here are the details of GDP of the economic depression.    

Year 

Nominal GDP (trillions)

Real GDP (trillions)

GDP Growth Rate

1929

$0.105

$1.057

NA

1930

$0.092

$0.967

-8.5%

1931

$0.077

$0.905

-6.4%

1932

$0.060

$0.788

-12.9%

1933

$0.057

$0.778

-1.3%

1934

$0.067

$0.862

10.8%

1935

$0.074

$0.939

8.9%

1936

$0.085

$1.061

12.9%

1937

$0.093

$1.115

5.1%

1938

$0.087

$1.078

-3.3%

1939

$0.094

$1.164

8.0%

1940

$0.103

$1.266

8.8%

         Source: www.jraces.com/s_nominal+us+gdp+growth/

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