U. S. History dbq 4/1/13 The Great Depression was caused by not one problem alone, but by the joint effects of several problems on the economy. While it is true that some events and beliefs were a major contributor

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U.S. History DBQ 4/1/13

The Great Depression was caused by not one problem alone, but by the joint effects of several problems on the economy. While it is true that some events and beliefs were a major contributor to starting the Great Depression, the true cause cannot be pinned on one single action, belief, or event. The Great Depression was a result of over-trusting the stock market, overspending, and overproduction of goods. These three contributors, together, were the cause of the Great Depression.

The stock market was very beneficial to America. Many people gradually built up large amounts of income from the stock market. However, in truth, it was nothing more than a way for Americans to gamble on companies. Just like all other forms of gambling, you can lose it all in a heartbeat. The bidding of stocks soon became very competitive. People started to buy stocks based on speculation alone. This proved to be devastating on the stock market, which in return devastated the entire economy. Harry J. Carman and Harold C. Syrett even went as far as to compare buying stocks to playing roulette or horse races in their book “A History of the American People”, in 1952. “Security prices were forced up by competitive bidding rather than by any fundamental improvement in American business” (A History of the American People). People thought stocks were worth far more than they actually were, and because of that people were investing their money in companies that were not making significant improvements. Additionally, many people were buying stocks for little amounts of money and being credited with many times more than they have bought. For example, someone could pay the amount of money for 10 stocks but receive 1,000 stocks and pay the difference later. This was a huge problem because it contributed to over speculation of stocks. The New York Times’ newspapers were covered with articles showing just how bad the stock market was crashing, and how it affected companies across the country. Over speculation of stocks cost many people large amounts of money, or in some cases, everything they had.

Another major cause of the Great Depression was overspending. People were spending more money than they were making, and soon gathered debt that they could not pay. When people could not pay off their debts, companies lost money. Why and how were people doing this? Companies offered to sell products on installment, or lay away. “Three out of every four radios were purchased on the installment plan, 60 per cent of all automobiles and furniture” (The Perils of Prosperity, Leuchtenburg,). People were tempted with ads that used persuasive tones. Just prior to the Great Depression, people were even buying speed boats. Americans were doing all of this spending even when the majority of the country was in poverty. According to data in Fredrick Lewis Allen, The Big Change, 60% of Americans were at, or under, the poverty line of $2,000 annual income in 1929. “… when people have bought all they can afford they go on buying…” (If Hoover Fails, Davis). They did not have the money to buy luxuries, and when they could not pay off their debts companies took the hit.

Another major contributor to the Great Depression was overproduction and how it affected workers. As manufacturing and agricultural output grew, the demand stayed the same because people did not have the money to buy all of the surplus inventory. As a result production was cut back and workers were laid off. These laid off workers then did not have the money to buy products from companies, creating a vicious cycle. Many people thought that the Great Depression was only the business cycle, but they were wrong. Looking at two charts from AmeriTrust Co., Cleveland, we can clearly see the difference. One chart shows the normal flow of the business cycle, with declines happening periodically over short times, and another showing the Great Depression. The difference between the two is that the Great Depression lasted much longer than normal for the business cycle, effected a very large amount of the country, and was reaching far lower points than normal. According to statistics from Historical Statistics of the United States, in 1926 only 1.8% of all Americans were unemployed. Just 7 years later, in 1933, that number jumped exponentially to 25.2%. It was not uncommon for workers to take responsibility for multiple areas of a job for the same pay, as we can see in Paul Blanshard’s How to Live on Forty-six Cents a Day. “You know he’s working four jobs… and he ain’t gettin’ any more than he used to get for on”. This was in hope of saving money on worker wages because of the cut backs on production. The political cartoon, The Stumbling Block, is a great visual representation of overproduction. The farmer trips over a large sack titled “over-Production” and spills a bunch of eggs that splatter with the prices of goods in the puddle. This shows that farmers were making growing too much for the demand to handle. Overproduction caused a vicious cycle that resulted in laid off workers, which only made matters worse for the country, and would contribute to the Great Depression.

The Great Depression was an awful time in U.S. history, but if we understand why it happened in the first place than we can prevent it from happening in the future. The Great Depression was the result of a series of chain reactions that happened all at the same time. The impact of over speculation, overspending, and overproduction weighed heavy on the U.S economy and is what drove it into the Great Depression. No single factor could have done this, but the joined problems were what caused the Great Depression.

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