The Great Depression Possible Leads To Its

Cause Essay, Research Paper

The Great Depression is known as the worst economic disaster of our time. While this fact is accepted throughout the world, a specific cause to this disaster remains a mystery. Maybe there is no one certain reason. Maybe it was a result of widespread factors causing the world-wide recession. Overproduction, World War I, and the banking system were all origins of the Great Depression.

Thanks to the “roaring twenties,” consumers of the late twenties were very confident. They didn’t care to spend. To complement the increased spending, producers began to spend more as technology improved production speeds and costs. Author T.H. Watkins says “more and better goods were produced during this time (the 1920’s), than at any time in history” (45). With slightly increasing wages, consumers bought as much as their wallet would allow them. However, they couldn’t afford to purchase all that was produced and overproduction occurred.

Even though overproduction occurred, that still wasn’t enough to cause this stagnant economic recession. World War I was partly to blame because it had made the international economy unstable. Though Great Britain was the national creditor before the war, devastating circumstances made G.B. needy for some finances instead. In fact, much of the continent of Europe had been destroyed. Factories, farms, and homes were all brought to the ground as the battle between nations began. By the end of the war, the United States was the least harmed of the Allied nations. The United States didn’t lose near the lives but it did lose a lot of money. After the war, nations still sought cash to repair their tarnished homelands. The United States and its supposed booming economy became the lender to many countries. These loans couldn’t be repaid. In fact, Europe even relied on U.S. loans to purchase U.S. goods. With the foreign trade market in a downward spiral, it was evident that harsh times were soon to come. As Paul Gusmorino illustrates on his web page, by 1929, ten percent of American gross national product went into exports. When the foreign nations discovered they couldn’t afford to buy U.S. goods, U.S. exports fell a drastic thirty percent seemingly overnight. The $1.5 billion lost in foreign sales between 1929 to 1933 was one-eighth of all lost American sales, Gusmorino concludes.

So, as the world economy became a nightmare, the banking system of the United States also became a disgust. After World War I, U.S. banks were extremely corrupt. Watkins writes that banks were poorly managed, stating that banks gave high-dollar, unsecured loans to promote speculative enterprises (47). Banks wanted the United States to prosper so they granted money to many entrepreneurs. One can’t blame the banking system for trying to lend a hand to “big business.” However, the banking system definitely polluted our economy and assisted the world in falling into the Great Depression.

Whatever the case may be, it is obvious that one may draw several conclusions when looking for a cause of the Great Depression. Nonetheless, until one reason can be expedited, no one can ensure the safety of today’s economy. So, as the search continues, we must use the origins we do realize to prepare for possible economic disaster in the future. No one can be sure it will happen again, but what do you think?