The Beginning of the Depression

By 1928 the construction boom was over. The spectacular rise in prices on the Stock Market from 1924 to 1929 bore little relation to actual economic conditions. In fact, the boom in the stock market and in real estate, along with the expansion in credit (created, in part, by low-paid workers buying on credit) and high profits for a few industries, concealed basic problems. Thus the U.S. stock market crash that occurred in October 1929, with huge losses, was not the fundamental cause of the Great Depression, although the crash sparked, and certainly marked the beginning of, the most traumatic economic period of modern times.

By 1930, the slump was apparent, but few people expected it to continue; previous financial panics and depressions had reversed in a year or two. The usual forces of economic expansion had vanished, however. Technology had eliminated more industrial jobs than it had created; the supply of goods continued to exceed demand; the world market system was basically unsound. As business failures increased and unemployment soared--and as people with dwindling incomes nonetheless had to pay their creditors--it was apparent that the United States was in the grip of economic breakdown.

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