Final Exam for History 222

Felicia McCaw
American History

#1 The Great Depression had profound effects on America. Discuss the Great Depression’s causes and ramifications on our culture. Answer but don’t limit yourself to the following questions. Why was the depression so widespread and devastating? How did America respond to the depression? What would be the long-term consequences of the depression?

What was the Great Depression?
Began in 1929 – 1939 (lasted until World War II started)
Official Time Frame 1929 – 1941

The Great Depression was an economic downturn that affected America and many countries in the European section of the world. The actual time frame of when it started was on October 29, 1929 (which was known as Black Tuesday).

Questions as to what exactly caused the depression are still being studied and analyzed but what can be ascertained is that there was a structural weakness in the economy, ruination of individual investors, massive bank and financial institutions, stock market crash (October 29, 1929 known as Black Tuesday), U.S. Federal Reserve decision to return the Gold Standard at Pre-World War I parities (US $4.86:£1), breakdown or decline in International Trade, under consumption and lack of investment spending, over production which caused price statutes to be glutted and monetary flow to decrease. Further causes that contributed to the Great Depression was the low level of economic activity, high levels of unemployment and decline of American Exports due to high tariff’s charged which lead to reduced trade. Furthermore, the depression was so widespread and devastating because it installed fear in every person, every banking facility, every business in this country that we might cease and be a sitting duck for any opportunist to come in and take over if America could not come out of the depression and take care of its own.

This era of time affected everybody and everyone suffered tremendously in this country and the farmers and farm exports were hit the hardest whereby it caused large amounts of defaults on loans and foreclosures of farms which resulted in sales of their assets and land for nothing hardly and only covered a fraction of the amount they owed.

This situation resulted in the collapses of banks all over the country due to farm loan defaults and other businesses that defaulted as well. (By 1933 – 11,000 of 25,000 banks failed in the United States).

Felicia McCaw
American History
Final Exam for History 222
Page 2

Unfortunately, the banks had relayed too much credit and were overstretched beyond capacity and could not survive the staggering losses. Even though the banks tried to save themselves the assets of farmers and businesses were valued at less than nothing compared to what was borrowed and due to everyone being in dire straits there was no one hardly able to come up with any liquid money or capital.

The banks were in a terrible bind and the net worth of businesses had depreciated to an unsalvageable level and their assets were virtually useless and the profit levels had descended to near non-existence which caused reduction in output, trade and ultimately lead to a decrease of employees. All these factors and more led to severe loss of the banking facility ability to function and the banks that stayed afloat were fearful of making loans to businesses, farms or others and only made loans based on new criteria which further lead businesses and owners to feel fear of not being able to operate or gain new trade or retain the trade they had.

Everything that occurred seemed to have a chain effect methodology affixed to it. If one thing failed then the next and so on it went. But overall the people in this country did not quit even though they were in despair they still tried to survive the best they could with whatever they could get their hands on or worked any job they could. Furthermore, jobs existed but there was not enough for everyone and the businesses tried to employ as many people as possible but they had to retain or keep on retention liquid capital (money). Because unemployment was at its highest level of 12 & 15 million workers or 25 – 30 percent of the workforce and due to the lack of jobs no one was able to buy housing and no noticeable profits could be made therefore capital investment and construction slowed and then stopped because of lack of employed individuals and lack of monetary funds available to be invested.

Felicia McCaw
American History
Final Exam for History 222
Page 3

America responded by putting their confidence in a man who said he had a dream to make this country turn around and elected him president and he was the turning point or beginning catalyst and defeat of The Great Depression when they elected President Franklin D. Roosevelt in 1932 and his goal was to turn this country around and initiate life and plant a seed to grow, restructure and nurture it to make this country great again. During his tenure as president (him and his Brain-Team) immediately started introducing a number of major changes that affected the American economy. Some of the policies put in action were increased government regulations and massive public-work projects but the best policy was The New Deal and it was one of the most significant policies put into effect and this caused and helped accelerate recovery and even though a rollback was done to this policy it only caused a minor setback in 1937.

Further, even though these policies were put in action to confront the long-term consequences of the depression and halt the faltering of this great nation and help citizens have a decent living, food, shelter and try to halt the devastation caused throughout the country and halt criminal activity high employment was still prevalent as well as a depressed economy. After the United States of America entry into World War II in 1939 reflation or a normalized economy was established and also every country that left the Gold Standard was able to recover from the depression.

Felicia McCaw
American History
Final Exam for History 222
Page 4
Bibliography

City Life During the Great Depression
http://middle.usm.k12.wi.us/faculty/taft/Unit7/citylife.h

Modern American Poetry
About the Great Depression
http://www.english.illinois.edu/maps/depression/about.h

Great Depression
Wikipedia – the free encyclopedia
http://en.wikipedia.org/wiki/Great_Depression

Introduction to “Age of Lost Innocence
http://xroads.virginia.edu/~ma03/pricola/fsa/intro.ht

Great Apprehensions, Prolonged Depression: Gauti Eggertsson on the 1930s
http://econjwatch.org/articles/great-apprehensions-prolonged-depressi

The Austrian Theory of the Trade Cycle, Economic Depressions: Their Cause and Cure
http://mises.org/tradcycl/econdepr.a

Recession? Depression? What’s the difference between a recession and…
http://economics.about.com/cs/businesscycles/a/depression.h

Theories on the Great Depression
http://www.southerndomains.com/SouthernBanks/p5.h

Great Myths of the Great Depression
By Lawrence W. Reed
http://www.mackinac.org/4013