The Great Depression

Since the beginning of the industrial revolution in the early nineteenth century the United States had experienced recessions or panics at least every twenty years. But none were as severe or lasted as long as the Great Depression. Only as the country got ready for war in the late 1930s did the depression finally start to ease.

Stock prices had been rising steadily since 1921, but in 1928 and 1929 they surged forward, with the average price of stocks rising over 40 percent. The stock market was totally unregulated. Margin buying in particular proceeded at a rapid pace as people borrowed up to 75 percent of the price of stocks. That easy credit lured more speculators and less creditworthy people into the stock market. The Federal Reserve even warned member banks not to lend money for stock speculation because if prices dropped, many people would not be able to pay back their debts. No one listened. The stock market began sliding in early September, but people ignored the warning. Then on пÑ--Ð...black ThursdayпÑ--Ð... October 24, 1929 and again on пÑ--Ð...black TuesdayпÑ--Ð... (October 29, 1929) the ball dropped. More than 28 million shares changed hands in frantic trading. Worried investors, suddenly finding themselves

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Overnight, stock values fell from a peak value of 87 billion dollars to 55 billion dollars. By the summer of 1929 the economy was clearly in a recession. Agriculture, in particular, had never recovered from the recession of 1920-1921. gross national product was cut almost in half, declining from 103. In 1929, the poorest 40 percent of the population received only 12. 1 billion dollars to 58 billion in 1932. The war battered international economy functioned only as long as American banks exported enough capital to allow European countries to repay their debts and to continue to buy American goods. Finally, when the Hawley-Smoot Tariff of 1930 raised rates to an all time high, foreign governments retaliated by imposing their own trade restrictions, further limiting the market for American goods especially agriculture products. From the height of the prosperity before the stock market crash in 1929 to the depths of the depression in 1932-1933, the U. During this period 9,000 banks went bankrupt or failed.

The crash was felt far beyond the trading floors. 5 percent of the aggregate family income, whereas