About tHe GReat Depression
The Great Depression was an economic slump in North America, Europe, and other industrialized areas of the world that began in 1929 and lasted until about 1939. It was the longest and most severe depression ever experienced by the industrialized Western world. Though the U.S. economy had gone into depression six months earlier, the Great Depression may be said to have begun with a catastrophic collapse of stock-market prices on the New York Stock Exchange in October 1929. During the next three years stock prices in the United States continued to fall, until by late 1932 they had dropped to only about 20 percent of their value in 1929. Besides ruining many thousands of individual investors, this precipitous decline in the value of assets greatly strained banks and other financial institutions, particularly those holding stocks in their portfolios. Many banks were consequently forced into insolvency; by 1933, 11,000 of the United States' 25,000 banks had failed. The failure of so many banks, combined with a general and nationwide loss of confidence in the economy, led to much-reduced levels of spending and demand and hence of production, thus aggravating the downward spiral. The result was drastically falling output and drastically rising unemployment; by 1932, U.S. manufacturing output had fallen to 54 percent of its 1929 level, and unemployment had risen to between 12 and 15 million workers, or 25-30 percent of the work force.
How the war affected the great depression
Most people claim that The Great Depression ended World War II. There was not enough money from the allies before the U.S. entered the action, and certainly no foreign nation sponsored American war costs out of charity. The U.S was left with two options: raise taxes and impede on economic growth by discouraging the wealthier from taking risks by investing in the economy or the not so wealthy from spending. The second: borrow the money. Of course this also has its costs: interests rates made it too expensive for essential investors to borrow or for those who needed to buy durable goods on credit (crowding out effect). What about repaying the debt? During a time of expansion, if government borrowing is not bidding up interest rates, the thriving economy is. This is more of a long run issue. Of course the generation spending usually does not need to worry about this because the debt is carried over into the next administration and congress. Fortunately people were more engaged in politics back then and elected officials were more responsible.