Two Views of the Great Depression (1932) Essay Example

The Great Depression was a severe worldwide economic downturn that took place mostly during the 1930s, beginning in the United States. It was the greatest, longest and deepest economic recession in modern world history. Instead referred to as a catastrophic economic event and its timing varied across nations; in most countries, it started in 1929 and lasted until the late-1930s. In the 21st century, the Great Depression is commonly used as an example of how intensely the world's economy can decline.

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The Great Depression is said to have begun with a catastrophic collapse of stock-market prices on the New York Stock Exchange in October 1929. The market crash wiped out a great deal of nominal wealth for individuals and businesses alike, and as that happened, many businesses held high retail prices and massive profits while holding down the wage increases. This aspect led to a growing imbalance between rising industrial productivity and declining consumer purchasing power. Later in the 1933-1936 the industrial production and prices both fell drastically bringing about drastic declines in output, severe unemployment, and acute deflation.

However, the black people would not feel the impact of the great depression simply because most of them were jobless or the best one can find would be a shoeshine boy, a porter or a janitor. The Negros barely raised 25 dollars for their wives back at home. However, the strike hit the white men who were used to make big money for themselves and their own families. You know he has been superior for so long and could not figure out why he should come down. Everyone was out trying to neat the other guy so that he could make it. It was pathetic.

The famous 'black Tuesday' (October 29, 1929) as termed by the investors, a widespread panic set in and triggered a wild scramble by panicking people unload stocks, therefore, breaking down the stock values. By the end of the month, the New York Stock Exchange had fallen in the value by an average of 37 percent. The breakdown of the stock market revealed the economic prosperity of the 1920s had been built on a weak foundation. The stock market crash shook public confidence in the nations' financial system, revealed significant structural flaws in the economy and Government policies.

The effect of the stock market crash either, shattered confidence in the American economy, resulting in sharp reductions in spending and investment of the available resources. Banking panics in the early 1930s also caused many banks to fail drastically; decreasing the pool of money available for loans and even ran bankrupt. On the other hand, the gold standard required foreign central banks to raise interest rates to counteract trade imbalances with the United States, depressing spending and investment in the Western countries. The Smoot-Hawley Tariff Act (1930) imposed steep tariffs on many industrial and agricultural goods, inviting retaliatory measures that ultimately reduced output and caused global trade to contract.

Conclusion

With a new Congress in session in 1932, President Herbert Hoover was forced to stretch his individualistic philosophy to its limits. He was now ready to use government resources to shore up the financial institutions of the country and that year the congressional initiative set up the Reconstruction Finance Corporation (RFC) with 500 million dollars (and authority to borrow 2 billion more) for emergency loans for struggling banks, life insurance companies, and railroads. The RFC remained a critical federal agency through the 1940s.