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Evaluate the Relative Significance of the Causes of the Great Depression

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The Great Depression, starting in 1929 on Black Tuesday, was the crash of the United States economy. During that time, 25% of Americans were unemployed, and millions lost their savings due to bank failure, leaving them poor and frustrated with the government. Causes of the Great Depression include the overproduction of crops and the deduction of consumer spending

After WWI, the demand for crops dropped 40%, lowering the prices of food, and forcing farmers to produce more to meet their budget. They tore up roots that had been holding the land in place to make room for crops, and combined with a drought and high winds, started the Dust Bowl. This ruined farming land across the United States, forcing farmers to leave their land.

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My great grandmother, Mildred McClellan-Vanarsdale, lived through different historical events in the African American community. "If there is no struggle there is no progress," a famous quote spoken by the great Fredrick Douglass. It explains that some situations need to have a struggle in order to prosper. The African Americans that lived in the time period of the thirties to the two-thousands understood every event that took place. The Great Depression was a big event that took place before the birth of my great grandmother. The Great Depression had a huge impact on Mildred's parents. My great grandmother was born in 1938, which was the end point of the Great Depression. It was a period of a huge economical downfall in the United States. It was ranked the worst and also the longest period of unemployment being high. The president during The Great Depression was Herbert Hoover. The Reconstruction Financial Corporation was created by him as an attempt to help the financial problem. It did not help very much. October 24,1929 was the day the stock market crashed in America. It was later known as "Black Thursday". On October 29,1929, stocks were being traded for falling prices

This day was later known as "Black Tuesday". Fourteen million dollars were lost on "Black Friday" and thirty million were lost in that entire week. The stock market was the first sign of The Great Depression.

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Before the start of The Great Depression of 1929, most of the investors in the American Stock market consisted of traders who had borrowed loans. Additionally, the banking sector was already suffering from the effects of bad loans due to farmers and other small scale investors suffering losses in droughts and other unfortunate occurrences (Mitchener & Mason, 2013). Therefore, the majority of American commercial banks were already in the red by the time the markets collapsed on Black Tuesday. Combined with a glaring absence of sound government monetary systems as well as Federal Reserve support, the American banking sector suffered huge losses in the collapse. Agricultural, shipping, and automotive construction industries were major sources of the GDP of the United States, Britain and most developed European countries. Concurrently, the majority of these industries were interlinked with agriculture providing most of the jobs, raw materials, and employees. When droughts and other natural misfortunes hit the industry in the mid-1920s, most of these farmers and other small scale businessmen were unable to provide enough output affecting agriculture’s sister industries (Eigner & Umlauft, 2015). These industries formed the largest portion of borrowers for American commercial banks who now faced bad loans in their hundreds of millions of dollars

Unfortunately, the same banks could not sell off debtors’ assets as the adverse effects of the Depression’s effects on consumers’ purchasing power has already settled in. Combined with the laxity of the Federal Reserve to intervene on time, many commercial banks collapsed catalyzing the Great Depression. What modern day economists can learn from these unfortunate events is that Central banks must work in close coordination with commercial banks to control the amount of liquidity in the economy. Before the Depression, the market was flooded with the commodities and financial products that encouraged consumers to borrow unrestricted. When they were unable to pay back, the banks collapsed (Crafts & Fearon, 2010). Additionally, the laxity of the Federal Reserve in the 1920s and 1930s taught economists to promote Central Bank regulation of commercial banks using liquidity and micro-economic stimuli.

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Altogether, the Great Depression led to untold suffering to millions of Americans as well as the devastation of the country’s economy. The effects extended to other countries as well due to international trade just as it happened during the recent economic down turn. No country is in isolation and its activities affect other countries too even if they do not have a hand in causing the problems. It therefore follows that countries must take precautions to prevent an event like the Great Depression by learning its causes as well as its effects in order to minimize future damage or suffering in case of a similar tragedy.

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Crafts, N., & Fearon, P. (2010). Lessons from the 1930s Great Depression. Oxford Review of Economic Policy, 26(3), 285-317.

Eigner, P., & Umlauft, T. S. (2015). The Great Depression(s) of 1929-1933 and 2007-2009 Parallels, differences and policy lessons. SSRN Electronic Journal, (2), 5-12.

Mitchener, K. J., & Mason, J. (2013). ‘Blood and treasure’: Exiting the Great Depression and lessons for today. The Great Depression of the 1930s, 395-428.

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