Time Line of The Great Depression

Yesterday Dazd got me to thinking about our economy and how it seems that we’re heading for another great depression. I have to admit the signs are there, and things are getting a little scary, okay in some instances WAY scary. Anyway this morning I’ve been reading up on things that lead to the depression of the 1930’s and thought I’d share it with you guys. So if you’re ready for a history lesson here goes…Oh BTW I got the following info from www.encarta.msn.com.

  • Americans in the Roaring Twenties turned inward, away from international issues and social concernsand toward greater individualism. The emphasis was on getting rich and enjoying new fads, new inventions, and new ideas.
  • The self-centered attitudes of the 1920s seemed to fit nicely with the needs of the economy. Modern industry had the capacity to produce vast quantities of consumer goods, but this created a fundamental problem: Prosperity could continue only if demand was made to grow as rapidly as supply. Accordingly, people had to be persuaded to abandon such traditional values as saving, postponing pleasures and purchases, and buying only what they needed.
  • Many people who were willing to listen to the advertisers and purchase new products did not have enough money to do so. To get around this difficulty, the 1920s produced another innovation—“credit,” an attractive name for consumer debt. People were allowed to “buy now, pay later.” But this only put off the day when consumers accumulated so much debt that they could not keep buying up all the products coming off assembly lines. That day came in 1929.
  • Farmers had expanded their output during World War I, when demand for farm goods was high and production in Europe was cut sharply. But after the war, farmers found themselves competing in an over-supplied international market. Prices fell, and farmers were often unable to sell their products for a profit.
  • After World War I the United States became the world’s chief creditor as European countries struggled to pay war debts and reparations. Many American bankers were not ready for this new role. They lent heavily and unwisely to borrowers in Europe, especially Germany, who would have difficulty repaying the loans, particularly if there was a serious economic downturn. These huge debts made the international banking structure extremely unstable by the late 1920s.
  • In addition, the United States maintained high tariffs on goods imported from other countries, at the same time that it was making foreign loans and trying to export products. This combination could not be sustained: If other nations could not sell their goods in the United States, they could not make enough money to buy American products or repay American loans.
  • The rising incomes of the wealthiest Americans fueled rapid growth in the stock market (see Stock Exchange), especially between 1927 and 1929. Soon the prices of stocks were rising far beyond the worth of the shares of the companies they represented. People were willing to pay inflated prices because they believed the stock prices would continue to rise and they could soon sell their stocks at a profit.
  • In the fall of 1929 confidence that prices would keep rising faltered, then failed. Starting in late October the market plummeted as investors began selling stocks. On October 29, in the worst day of the panic, stocks lost $10 billion to $15 billion in value. By mid-November almost all of the gains of the previous two years had been wiped out, with losses estimated at $30 billion.
  • The stock market crash announced the beginning of the Great Depression, but the deep economic problems of the 1920s had already converged a few months earlier to start the downward spiral. The credit of a large portion of the nation’s consumers had been exhausted, and they were spending much of their current income to pay for past, rather than new, purchases. Unsold inventories had begun to pile up in warehouses during the summer of 1929.
  • The stock market crash was just the first dramatic phase of a prolonged economic collapse. Conditions continued to worsen for the next three years, as the confident, optimistic attitudes of the 1920s gave way to a sense of defeat and despair. Stock prices continued to decline. By late 1932 they were only about 20 percent of what they had been before the crash. With little consumer demand for products, hundreds of factories and mills closed, and the output of American manufacturing plants was cut almost in half from 1929 to 1932.
  • Unemployment in those three years soared from 3.2 percent to 24.9 percent, leaving more than 15 million Americans out of work. Some remained unemployed for years; those who had jobs faced major wage cuts, and many people could find only part-time work.
  • Many banks had made loans to businesses and people who now could not repay them, and some banks had also lost money by investing in the stock market. When depositors hit by the depression needed to withdraw their savings, the banks often did not have the money to give them. This caused other depositors to panic and demand their cash, ruining the banks. By the winter of 1932 to 1933, the banking system reached the point of nearly complete collapse; more than 5,000 banks failed by March 1933, wiping out the savings of millions of people.
  • The plight of farmers, who had been in a depression since 1920, worsened. Already low prices for their goods fell by 50 percent between 1929 and 1932. While many people went hungry, surplus crops couldn’t be sold for a profit.
  • Although economic conditions improved by the late 1930s, unemployment in 1939 was still about 15 percent. However, with the outbreak of World War II in Europe in September 1939, the U.S. government began expanding the national defense system, spending large amounts of money to produce ships, aircraft, weapons, and other war material. This stimulated industrial growth, and unemployment declined rapidly. After the United States entered the war in December 1941, all sectors of the economy were mobilized to support the war effort. Industry greatly expanded, and unemployment was replaced by a shortage of workers.

 

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13 responses to “Time Line of The Great Depression

  1. Yeah, I reckon that is about the gist of it but conditions are different now…it is the Federal government and many state governments that are overextended..and the National debt is reflected in the the dollar being de-evaluated against the EU and other world currencies. This de-evaluation helps some..it makes our exports cheaper for other countries to purchase but it also makes imports..including the ever important crude oil more expensive

    Many are worried (including me) that we may be headed for a major recession if not a depression because of the National debt and the high cost of energy plus the fact that we just don’t have enough production of exportable goods anymore to even come close to a trade balance..and then add the fact that some three fourths of the nation depends on a government pay check of some sort in part or for all of their income.

    Something is gonna have to give..it is just a question of when. Savings are protected by the Feds..and the only saving grace is that by definition a depression is when there is deflation instead of inflation. Those of us who have a few bucks put aside may come through in one piece..those who are head over heals in debt may get hungry…and then expect the rest to feed them..and that is why I recommend having a lot of lead stockpiled.

  2. While I’ll agree with GuyK on his viewpoint of National Debt, the crisis goes deeper with our USA banks borrowing money from Global banks for the housing market fiasco.

  3. Three things that scream we are heading for a depression, at least to me, are:

    1. Housing market debacle
    2. consumable goods prices
    3. fuel prices

  4. Scary stuff. I’m investing in lead 😉

  5. Not gonna happen. Slow or negative growth the next two quarters followed by a quarter of decent growth. After that, it depends on the elections to some extent.

    But even if Osama or the Hildebeest get in, it won’t lead to anything like the unemployment of the Great Depression era.

  6. Even if the guvmint bails out all those greedy bastids of the financial world, it will be the “consumer” that’ll pay dearly.

    Lucky for me I live paycheck to paycheck and if’n the banks go belly up, I won’t lose anything! 🙂

    Credit/Debt was a major cause of the over all collapse. Right now the guvmint is bailing out those who took advantage of discretionary practices of “lending” to people who couldn’t afford it. Basically, they committed fraud in my opinion. The committed this act to those borrowing and those lending. Right now a relative is walking away from their house because their mortgage has been sold 7 times since January because the payments went from $300 a month(which they CAN afford) to over $500 a month.

    Lets not forget that Insurance companies are now practicing 20 percent co-pays on medications and visits. Not $20 but 20%. So if you have $500 of medication monthly, instead of $20 you now have to pay $100.

    And across the board, what you got for $100 in 1984 now takes approximately $280 in 2007.

  7. I hear you Dazd.

    Our insurance premiums went up this year as well as our deductible. We now have a $1000/per person co-pay instead of $500. Plus the new vision insurance can’t even be called insurance.

    Our housepayment has went up 2x since we moved here 4 years ago. Oh and our homeowner insurance went up by $100 per year.

    To add insult to injury it now costs us around 80.00 to fill up our gas tank.

    Our grocery bill has jumped from an average of $200 per week to $250 per week.

    Where is it going to end???

  8. I say we all move in together and become roommates. It could be fun AND save us $$$ or it could be our downfall.

    Thanks for those facts, MRS JGB and everyone’s comments. Very insightful.

  9. LOL I snore loudly…you don’t want me as a roommate.

  10. OMG I snore too… so she’d be getting the stereo version. LOL

  11. I have been watching this for a while now. The politicians were lying then as they are lying now. Check out these two posts at
    Freedom Port: Firefly for more info.

    http://jeffersoniantoo.wordpress.com/2008/05/07/let-me-get-this-straight/
    http://jeffersoniantoo.wordpress.com/2008/03/15/history-rhymes/

  12. dragonlady474

    Effective article. I got depressed just reading it.

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