Great Depression

Dear Luke,

The Great Depression was caused by many things: Overextension of credit, farms and industries were depressed, the banking industry weakened, there were problems in the monetary policy, and there was a decline in foreign trade. Overextension of credit was when people bought things in the 1920’s on installments, which meant people were making payments a little at a time for something that cost more than they could pay for. They bought things like cars, appliances, stocks, and almost everything imaginable.  Farms and industries were being closed because farmers couldn’t pay for their land since new machines increased how many crops were being produced; therefore they had a huge rise in crops, which makes the prices lower. There were more goods being produced than people were buying, making the farmers lose their money and not be able to pay for their land. When the banking industry weakened, that means that people would take out a lot of money, called loans, which would take money out of other people’s bank accounts. When those people went to get their money to pay off things, they couldn’t and the bank had no money to give for either people.  So when people lost their jobs, they had to take out loans, but when the bank gave too many loans, they ran out of money and people lost their houses. Another cause was that there were problems in the monetary policy. The monetary policy was when the republicans thought that when the rich people had money, so would the poor people. They called it the trickle-down effect, if the rich people spent their money on things, it would cause the poor people to as well. A decline in foreign trade was when the amount of things we traded with other countries from the US went down because of high tariffs, which are taxes that cause things to cost more, were placed on international trade. President Hoover temporarily lowered the tax cost, but it was clear by 1831 that this still wouldn’t help us out of debt. In 1932 President Franklin D. Roosevelt was elected president and in 1933 he proposed the New Deal, which was making it only legal for Federal Reserve banks to operate which were only banks that were for emergency for the US to bring our economy out of debt. He also created new agencies like the Civilian Conservation Corps (CCC) which was a public works program that provided unskilled manual labor jobs and the Agricultural Adjustment Administration (AAA) which restricted agricultural production by paying farmers not to plant, Public Works Admin (PWA) was big public works like: dams, bridges, hospitals, and the Tennessee Valley Authority (TVA) which provided flood control, electric generation and economic development in Tennessee. The Great Depression was a hard time for the US but we overcame it and now we are not doing too well again.