The Great Depression

A depression is a period of drastic decline in the national economy, characterized by decreasing business transactions, falling prices, and high rates of unemployment. The Depression of 1929-40 will be ingrained in the minds of
Americans for generations to come. (Even today, many presidential decisions are affected by memories of and by
reading and learning about the Great Depression.) The tragic poverty and unemployment of that time have had no
equal. Between October 1929 and the early 1940s, unemployment hit 25 percent of the work force, or about 13
million people (this compares to about 34 million, using 1990 figures). The value of goods and services produced in
the country was cut in half, and stock market prices fell about 90 percent. The hopes and dreams that marked the
1920s came to a sudden end.

Although the 1929 stock market crash was a major factor leading to the Great Depression, other factors contributed.
Some of the culprits included:

 The actions of the Federal Reserve System.
 Installment buying.

 Overproduction of consumer goods and a decline in investment.

 Speculation.

The crash of the stock market came early in the Depression, and its effects were less significant than the waves of
bank failures that followed. The first wave came in October 1930, the second in March 1931, and the third in the last
quarter of 1932. In each case, banks failed because savers panicked- Savers, fearful that the banks would collapse in
the poor business climate, lined up to withdraw their funds. Banks did not (and still dont) keep on hand 100
percent of the cash deposited (they make loans to other people with their depositors money); they could not pay back all their depositors at once and thus went bankrupt. Millions of Americans lost their life savings in the bank failures.