Causes of the Great Depression – Erin Vales

The Great Depression

Dear 5th Graders,

The Great Depression was a time when America struggled with the economy in the 1930s. An economy describes the wealth of a country. During the 1920s, the economy was considered to be thriving very well in America at the time until 1929, when the Stock Market crashed. The Stock Market is the exchange of stock. Stock is when you buy a piece of a business and you own part of it. For example, my favorite restaurant is McDonalds. If you buy a part of McDonalds, in return you receive some of the profit McDonalds makes.

Although many of you would think that the Stock Market crash of 1929 would cause the Great Depression that is not the case. The Stock Market crash is considered to be the catalyst of the Great Depression. Catalyst means the spark or beginning. There are a few more causes of the Great Depression. Throughout the 1920s, many people bought on credit. When your mom or dad buys something at the store, they most likely buy on what is known as a credit card. Now although you may not see them giving the cashier the money, they actually are. With a credit card, you can buy goods right then and there, but at the end of the month, you have to pay the money that you spent to the bank. This whole idea of buying and paying later is what is known as credit. During the 1920s, many people bought on credit and at the end of the month, they could not pay their debt. When nobody could pay their debt, the banks would not receive their money back so the banks had no money.  When everyone began to panic and try to withdraw their money, the banks could not give them any because they had none.

Although credit was a huge reason that caused the Great Depression, the farming industry was also a cause of the Great Depression. Just like the economy in the 1930s, the farming industry was also depressed. The farming industry was depressed (basically weren’t making a lot of money or selling a lot of goods) because during the 1920s, a lot of food began to be processed. The industries started to produce America’s food supply so thus the farming industry began to crumble.

The growing gap between the upper and lower classes of America began to get bigger and bigger in the 1920s. The wealthier families and poorer families began to become widely divided in America. Many jobs were being mechanized in the 20s. Mechanized means that the industries began to introduced machines to put together their goods. With jobs decreasing in amount, people were becoming poorer so they could not support their families.

Another cause of the Great Depression was the failure of the monetary policy. The monetary policy is the belief that the money of the upper class would “trickle down” (go down) to the lower classes to help them out with their money situation. The government tried to cut the taxes of the wealthy to get them to spend more money but this did not work. The lower classes remained struggling economically.

The final cause of the Great Depression is the decline of foreign trade. Foreign trade is when the United States trades goods or services to other countries.  There was a decline in foreign trade because there was not much American money left. With all of these causes combined led to the start of the Great Depression.

(Below are a couple of pictures from the Great Depression)

Sincerely,

Erin Vales

images                                Unemployed_men