Crisis of Nineteen-Twenty-Nine.
The Great Depression
The cloud hung over the nervous, paranoid United States of America as they looked up at the banks as their The cloud hung over the nervous, paranoid United States of America as they looked up at the banks as their skies and the stock market their clouds as they watched a catastrophe crash at their own feet. The metaphorical train carrying the economy of the U.S. fell off its tracks into the disasterous uproar of the 1929 Great Depression, an event not easily forgotten.
What were the warning signs and alerts to this horrific disaster? One major cause of this panic was the stock market crashing. This crash of the stock market was more a symbol of the issues beginning with companies. The government began to raise the Federal Funds Interest Rate in the spring of 1928 and continued to raise it even in the recession in the beginning of August 1929. This led to the crash of October 1929 when companies started to lose money. Stockholders lost massive amounts of money by 1930. Despite the stock market's major affect, this alone was not enough to create the Great Depression. This crash of company value was paired with financial panic where many started to sell their stocks, fearing that their stock would drop in value even more than it had already. This panicked selling created an even more extreme drop in company value. It was becoming a vicious cycle. To add to this economic predator many began hoarding their money and only spending it in the most extremely frugal ways, not wanting to become bankrupt or in poverty. Although this saved these individuals, this extreme saving caused businesses to fail from not enough profit. The unemployment rate soared and many withdrew money from the banks and sold their stocks. Adding to this mess, fear was tingling in the air.
When the stock market plummeted many investors began to turn towards currency markets where the dollar was backed by gold held by the U.S. Government. People began to sell dollars for gold in September of 1931, which caused a run on the dollar. Therefore, the Federal Funds Interest Rate was raised to try and prevent the dollar from losing its value. Banks began to fail as investors removed most to all of their money from the banks. The government ignored the banks' problems and so banks and other companies began to fail. This destructive path was caused by the government since not enough money was circulating for there to be a successful economy.
The United States of America was an important player in the trading game of the world, sending goods to many of the countries around the world as well as receiving many goods. In a desperate attempt to help protect and save American companies, the Hawley-Smoot Tariff was signed in the United States. The tax on goods imported to the U.S. had a 50% increase. This caused high taxes on any products coming from other foreign countries. This plan backfired and there was less trading between the United States and other countries, not allowing as much money from other countries to arrive. The U.S.A. was heading towards total economic shutdown from simply lack of economic stimulation.
What was the saving grace that pulled the economy out of the rumble and gunsmoke of crashing businesses, banks, dollars, and stocks? The new president, Franklin Delano Roosevelt signed the "New Deal" into law. This plan created 42 new agencies that were made to create jobs to help with the drastic unemployment rate. These agencies also allowed unionization, a form of working in a labor union which is an organization of workers formed with specified jobs and boundaries around wage, work hours, abilities, benefits, and working condition; a union usually requires more jobs because certain jobs require more people with their specified job. Unemployment insurance was another bonus to come from this deal. Many of the businesses from this scenario are still here today such as Social Security, the SEC, and more that are used to protect and guard the economy. Despite immediate, positive response in the economy, it took many years for the U.S. to fully recover after the crashing economic meltdown. It did seem to make a full recovery despite the fact our economy is starting to fail once again. Hopefully, the United States will be able to fix itself once again.