How to Understand The Great Depression

Americans faced no more trying historical period than The Great Depression. Why did the economic world collapse in the 1930s and how did it recover? Here are several considerations.

Instructions

Difficulty: Moderately Challenging

1. Understand that "The Roaring Twenties" was a period of economic prosperity, but only for a select few. As the decade progressed, the disparity between the rich and everyone else had grown. By 1925, 0.1 percent of Americans owned 34 percent of all its savings while 80 percent of Americans boasted no savings at all.
2. Study the effects of speculation in the late 1920s, which was the practice of buying and quickly unloading stocks based on borrowed money. The Stock Market Crash of October 1929 wiped out many an investor and caused a tremendous hardship on the banking system. The crash itself, however, is not believed to be the primary factor in the hardships to follow.
3. Realize that American exports fell from $5.2 billion to $1.7 billion from 1929 to 1933. The Great Depression struck in earnest in March 1930. President Herbert Hoover, a defender of big business who believed the economic slump was temporary, became overwhelmed by the growing disaster and was clobbered by Franklin Roosevelt in the 1932 presidential election.
4. A soup kitchen feeds the hungry during the 1930s Learn about the depths of The Great Depression. By 1933, unemployment had soared to more than 25 percent and starvation was even beginning to seep into American life in some areas. Soup kitchens sprung up to feed the hungry and ramshackle tarpaper homes were built to house the homeless. Whole rows of such dwellings were called "Shantytowns."
5. Consider The New Deal, a series of programs established by Roosevelt to combat the economic hardships. The New Deal reformed the banking system, stimulated demand for American products and began dozens of agencies that put the unemployed back to work. By the end of his first term, unemployment had fallen back to 9 percent.
6. Find out about the worldwide effect of The Great Depression. It greatly hindered the economies of all industrialized nations, including Germany, which was attempting to pay reparations for its warlike acts of World War I. Dictator Adolf Hitler played upon the misery of his people to earn support and power. The Great Depression played a huge role in leading up to the horrific events of the Second World War.
7. Read about how the war economy helped lift the United States out of The Great Depression. By 1942, when America was officially at war, the nation was out of his financial doldrums.

Tips & Warnings

• It's interesting to note the opposite philosophies of Hoover and Roosevelt and how each tried to cope with The Great Depression. Hoover was an advocate of big business, but Roosevelt believed it had grown too big for its britches and empowered the labor unions and common people.
• It has been said that those who don't learn from the past are condemned to repeat it. Those active in the stock market should indeed take note of the practices of the 1920s that helped bring along the depression of the following decade.