Noticing the decrease in buying by the lower classes, the government set up a new way to buy essential goods. Their idea was to make it possible for Americans to buy cars, stocks and other major purchases without paying for them right away. This idea was credit and Americans took advantage of it by purchasing $1.4 billion dollars worth of consumer items in 1925. In a short four year span, the debt owed by Americans was almost $3 billion dollars. People were even allowed to buy stocks on credit. This allowed society to purchase large amounts of stocks and make either huge gains or huge losses off them. When the stocks were worth a lot, they were sold back and new money was created making living comfortably capable again. Debts on stocks rose along with the profits to a handsome $7 billion dollars, but in the 3 short months, loans increased by $1.5 billion dollars. With all these payments due, Americans couldn’t handle the stock piling bills. Banks all over were repossessing cars, houses, and boats, and now the banks could no longer collect the large amounts of money that was owed to them. Since there was no equity in banks, they were forced to close down leaving accounts stranded. This lead to the decrease in purchases causing business inventories to triple with no sign of sales increasing any time soon. The snowball effect would be a good way to describe the economic crisis hitting the U.S. (Joseph)
One other problem was with the distribution of funds unequally throughout the country’s industries. While some industries flourished, some others took dramatic falls. One such industry that thrived was the automotive industry and all other industries that were associated with it. The fields that were positively effected were almost all of the metal industries along with the rubber market and the glass industry. While people like Henry Ford were making astonishing gains, the entire agricultural industry took a serious nosedive in 1921. The problem started with an enormous surplus, which lead to a drop in the price of food by 73%. With the prices diving, there was no way for farmers to make any money. No sales meant that there was no way to make profits. The farmer’s average income was almost $500 dollars lower than the average workers salary. In turn, this gap made the task of buying essential goods like clothes and food almost impossible to buy (Smith).
Now the nation was faced with unequal distribution not only in society, but industry too. When you combined that with increasing debts owed by consumers who bought items on credit and over production, the result was a drastic decrease in stock prices in the stock market on October 24, 1929. Investors started to panic and sold stocks in enormous amounts and one week later over 16.5 million stocks were traded in just one day causing “Black Tuesday”. Now the Great Depression was truly upon us and would not go away for almost another decade.
Now our society was faced with many problems that they never had to contemplate before. This was a drastic change and people were forced to adapt to the new living conditions that were forced upon them. People who were used to living comfortably were now squeezing every penny to the last drop. Unemployment, poverty, sickness, hunger and other things plagued the U.S. for the next decade.
The Great Depression threw the economy into a downward spiral, which crippled the nation for many years. From the years of 1929 to 1933, the gross nation product fell $26 billion dollars from its original level of $100 billion dollars. The GNP was not the only thing that fell. Our nation’s factories dropped production by an astonishing %50 to try to counter act the decrease in purchases by consumers.
Now the effects could be seen directly in the closing of business’ everywhere. The biggest problem that people faced was that banks were closing all over. Over 8,500 banks had closed because they loaned out money that could no longer be collected, and they repossessed large numbers of expensive items from people who had not fully pay them off yet. Also, people who had money in the banks could no longer access it because there was no money, so this completely wiped out families savings. With no one buying anything, factories and shops everywhere were closing. There was no money for anyone to spend so production was cut almost in half. The demand for consumer products was almost completely demolished. Now people were being forced out of their homes to the streets with only what they could carry. With societies hands tied, there was nothing that could be done for several years. With business’ closing all over, people were left out of work. This layoff caused the single greatest jump in the unemployment rate in history from 3.1% in 1929 to 25.7% in 1933. There was little work and many Americans were left jobless for many years to come. Because there was now over 15 million people out of work, new problems arose in America (Duval).
A major problem now facing suburban America was the reality of not having a home. Many families were forced out of their homes when banks had to foreclose leaving men, women, and children to find any shelter they could. Many people would use any objects that they could find to make shelter. Old crates and scrap metal were used to create makeshift houses called shanties. These shantytowns were cleverly called "Hoovervilles" because of President Herbert Hoover, who was blamed for the catastrophe. Hoover even refused to allocate any financial aid to workers who were now unemployed leaving many families with now way to earn any money. Farmers were left with a large surplus, but there was no way to sell them for a profit causing farmers to be in the same predicament as unemployed workers. There were few middle- to lower-class workers with any money to support their families from 1929 to 1933. Getting food to families was an extreme chore during the depression. Parents would try to feed their kids first, but sometimes nobody ate at all. With rising stress levels, people often looked to suicide as the quick answer. Suicide levels were increasing every year from 1929-1933 in all major cities. This was the only way out for many but overall, it just left people with more questions and problems. With no money or possessions, people had new virtues to focus on such as friendship and family values.
The one question that every person asked in the Great Depression was this: whose fault was it? Some blamed bankers, stockbrokers, and businessmen but most fingers pointed to Herbert Hoover and his Democratic Party. President Hoover had an economic approach similar to that of Europeans views of the "laissez-faire". Laissez-faire means to leave it alone, and that is exactly what Hoover did with the economy until it was too late. Entire markets had the free reign to do whatever they wanted without the government interfering. With no government control, the business's set up monopolies, which dramatically cornered markets while consumers could only stand back and watch. Also, business's set up their own taxes, which allowed them to pay little for what they bought. Plus, many people were saving their money without putting it in the bank. Consumption along with investment were going down dramatically. Now the money differential between the classes was defined and it kept growing until the depression started.
Hoover's attitude towards the economy left the markets to spark their own sales and production but nothing close to that happened. The basis of the laissez-faire view was that business would heal its own wounds naturally. Jobs would be created and people would have money to spend leading to more production and business. This idea was so far from what was really happening. When the nation's economic situation started to go down hill, Hoover thought that if he balanced the budget and cut spending by the government things would even out. By cutting government spending he cut off much needed money that was going into the economy leaving the money supply even weaker. Right before the depression started, people were realizing that banks had little money. President Hoover tried to give emergency loans to banks but there was no use because the countries economic structure was about to crumble.
With so many problems looking America in the face, a change was in order and it occurred when Franklin Roosevelt took over the presidency in 1932. With a fresh face in office, the winds of change began. Roosevelt enacted a set of acts that comprised the New Deal. These mostly set up new agencies to regulate troubled markets. One such agency set was the Civilian Conservation Corps, which put a focus on keeping our environment clean and plush. This system was run by the Army and took young men off the streets and put them to work cultivating our country. There jobs were often general but well worth it because it was a paying job, and that was something that these men hadn't seen in a while (A New Deal).
Another act that was set up by Roosevelt was the National Industrial Recovery Act. This set up series of codes to regulate prices and production of industries. The act was not only looking at the well being of the industry but also the workers and its consumers. When business would cooperate, rewards given out by the government like suspending antitrust legislation. Roosevelt also set up many other acts and agencies such as the "Emergency Banking Act, Emergency Farm Mortgage Act, Agricultural Adjustment Act, the Public Works Administration and the National Youth Administration." All of these acts and agencies targeted most problems in America like unemployment, banking, rebuilding the stock market and creating security and confidence in Americans. This New Deal was a huge factor in bringing the U.S. out of its "slump" because its impact effected everyone almost immediately. Now the country was on the rise, and even though there was one more year of recession to hit America in the 30's, the future was looking brighter (Taylor).
The Great Depression was a time of crisis in America. Never had so many things fallen apart at one time, and it left Americans scared and in bad shape. People were faced with problems like losing houses, hunger, and unemployment. Yet, without many material things, people turned to things like family values and friendship. While Hoover was in office, the economic situation was bleak, and fell deeper and deeper in "the hole" until it could no longer fall anymore. A new face showed up in office, Franklin Roosevelt, and he sparked economic growth immediately in 1933. Although America was not completely out of the depression, the end was near. World War II came along in 1939 and created an economic boom by creating jobs and new funds due to increased production in America. With America jumping out of its hole, the Great Depression finally died.