Causes of the Great Depression -Michelle Swanson

Dear Fifth Graders at Twin Hickory Elementary School,

          The Great Depression was a period of time during the 1930s when America struggled with their economy. The economy of a country means the wealth of a country. The economy before the Great Depression was great! Lots of people were spending money using credit. People paid off their credit with installments, meaning they paid for things over a period of time. They had to pay interest, which means that they had to pay a little extra for the things they bought.

          People bought everything using this pay as you go plan (credit), including stocks. A stock is a portion or share of a business ownership, and people bought stocks to make money off of. If you had a stock in McDonalds, this means that you owned a part of McDonalds. Investing money (meaning putting money to use) in stocks was very risky because you took the risk of losing the money that you invested. As people began selling their stocks, stock prices started to decline. People who invested in the stock market then lost most or all of their money that they put in, and this is how the stock market crashed. The stock market crash was on October 29th, 1929, when the stock prices fell, and it became the start of the Great Depression.

          Banks also added to the start of the Great Depression. Because of all the money lost when the stock market crashed, banks didn’t have money anymore. Banks gave people loans, or money to borrow. People could not pay the loans back to the bank because they didn’t have money after the stock market crashed.

          Another cause of the Great Depression was the invention of new machines. New machines were introduced to farmers. These new machines helped to produce crops easier than before. This meant that not as many farmers were needed, so lots of farmers didn’t have jobs anymore.

          The textile, lumber, mining, and railroad industries all declined, causing a shortage of jobs in the United States. The introduction of new machines also made it harder for people to get jobs. With the lack of jobs in our country, people struggled to support themselves financially.

          Another leading cause of the Great Depression was the huge difference between the rich and poor people. There were very few people that were extremely rich, while the majority of the country was extremely poor. This means that most of the country’s money was in the hands of very few people, and everyone else was left with practically nothing.

          The failure of the monetary policy was another cause of the Great Depression. The monetary policy was the belief of the government that money would trickle down from the upper to the lower classes. The monetary policy did not work.

          The last cause of the Great Depression was the decrease in foreign trade, or trade among the US and other countries. Because America was losing money in the stock market, they were not longer able to trade with other countries. For example, America made taxes on Chinese goods higher so that Americans would buy American goods instead.

 Sincerely,  Michelle Swanson