how did the great depression begin?
investors began to worry about the boom would end and began selling stocks
investors paid back their loans too late to help the economy
people were not willing to sell their stock
farmers had to sell stock to pay for farm equipment
The Great Depression began with the stock market crash of 1929, which is often considered the triggering event. However, there were several underlying causes that contributed to the onset and severity of the economic downturn:
1. Stock Market Crash: In October 1929, investors panicked and started selling stocks in large amounts, causing a significant decline in stock prices. This sudden crash led to a loss of confidence in the stock market and triggered a chain reaction of financial events.
2. OverSpeculation and Stock Market Bubble: Prior to the crash, there was excessive speculation in the stock market. Investors and speculators were buying stocks on margin (using borrowed money) with the hopes of making quick profits. This created an artificial demand for stocks, leading to inflated prices that were not sustainable.
3. Unequal Wealth Distribution: During the 1920s, there was a significant disparity in wealth distribution, with a large portion of the population earning low wages while the upper class enjoyed immense prosperity. This inequality meant that a majority of people did not have enough purchasing power, leading to reduced consumer spending and economic stagnation.
4. Decline in Agricultural Sector: Farmers faced severe hardships during the 1920s due to falling crop prices, overproduction, and high debt levels. They were forced to sell their crops at significantly low prices, leading to financial difficulties and bankruptcies within the agricultural sector.
5. Failure of Banks and Financial Institutions: As a result of the stock market crash and subsequent economic downturn, many banks and financial institutions faced a loss of public trust and liquidity problems. Bank failures were widespread, resulting in people losing their savings and further exacerbating the economic crisis.
6. Global Economic Factors: The Great Depression was not limited to the United States; it had a global impact. Several factors, such as war reparations, protectionist trade policies, and weakened international economies, contributed to a decline in global trade, leading to a worldwide economic recession.
It is important to note that the Great Depression was a complex event with multiple interrelated causes, and the stock market crash of 1929 was just the initial trigger that revealed the underlying weaknesses in the economy.