Causes & Consequences of The Great Depression

The Great Depression was the worst economic slide in the history of the United States.It left many emotional and physiological scars, "invisible scars" as one writer called it, on the American people.There were many contributing factors to the causes of the Great Depression, which came along with a lot of consequences.To tackle the strain that the Great Depression was putting on the American people, President Franklin D. Roosevelt implemented The New Deal to which had it's own successes and failures.
In the late 1920s the stock market started to resemble that of a sporting arena; the way Americans followed stock prices as the same way they followed the exploits of such American idols as Babe Ruth or Jack Dempsey.The American people were convinced that it was their duty to buy stocks; and buy stocks they did.Stock prices increased approximately twice the rate of the industrial production during the bull market of the 1920s.Stocks were mainly bought on the basis of their perceived earning power rather than their actual value.For Example; Radio Corporation of America stock (RCA) shot from $85 to $420 , which was so overvalued that it didn't make sense to buy.However, investors would buy anyway hoping that they could sell later at a higher price once its perceived earning power would present itself.Many of these stock buyers were so confident that the purchase of stocks would be so profitable, that they bought more stock than they could afford; and they were able to do this via easy-credit and margin account market schemes.This allowed investors to purchase stocks by making as low as a 10 percent down payment, borrow the rest from a broker, and used the shares that they had just supposedly bought as collateral, or security on the loan.With this system, the buy now pay later concept spread in epidemic proportions throughout the United States.
At its peak in early September, the bull market had…


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