The market soon became a little bankrupt because there was a small market for luxury goods such as radios, cars, and vacuum cleaners, mostly because of all of the poor not in America. 60% of Americans earned less than $2000, the minimum wage for the bare necessities of life.
When the market started losing money and got fewer buyers, the companies were forced to reduce production and by doing this they had to lay off some of their workers causing unemployment
There was also the factor of farming in the United States. Farmers were encouraged to produce a lot of healthy and high quality food in the twenties, very fast.
This had advantages to begin with because farmers then had combine harvesters and had much bigger pieces of land. They also had tractors and a lot of materials needed. The farmers then became too efficient, they flooded the market with their produce, and they had produced far more food than America could eat. They created a lot of surplus food.
The farmers had to sell their goods so they lowered the price, as there was so much of the food, a lot of the prices became too low. Farmers did not make any profit anymore. There was too much food on the market. As the farmers did not get any money anymore, they became part of the poverty issue discussed earlier. They became come of the 42% who only got 10% of the money. Farmers tried borrowing money of banks for mortgages, but when they couldn’t pay back, the banks took their land.
There was the factor of Trade problems. Tariffs were put up in the country, preventing any foreign goods from coming in to America cheaply. This was very good for companies, as people starting realizing it was cheaper to buy goods from American stores rather than abroad. The only problem was that there were more and more crops developing in America. The only way to get rid of these was to sell them to other countries. The only problem was that other countries also put up these tariffs to save their own economy, so American business man found it hard to export into Britain. This really affected farmers, as now there was still a lot of surplus food with not much value. Companies were also affected as some of their money came from exporting. Because of the new tariffs, they had to close down some production lines.
The last factor affecting the great depression was the biggest one. It was speculation on the market. This factor brought the crisis of the Wall Street crash. About one million people were investing in companies shares in the late twenties. Speculation was the art of buying shares “on the margin” and then waiting for them to rise in price and then sell them for a profit. This created problems because people bought shares with borrowed money. For instance, one person would buy another’s shares using credits, that person now would sell the shares to another person who pays with them with borrowed money. The second person would not pay the first back. It all operated from banks, which were willing to loan money. These credit systems worked fine until some investors wanted to sell shares and not buy and also they wanted to sell for money, not credits. Many companies began to lose the amount of shares sold, and also lose profit on the stock market. Most rich investors began to sell shares because of thinking they were too high. In October 1929, everybody sold shares and the Wall Street stock exchange lost many share prices. The whole of the market crashed and many people were declared bankrupt, worsening the problem of Poverty.
Conclusion
There were four factors that accounted for the Great Depression. They were Poverty, Farmers, Trade and Speculation.
Speculation was the main problem that led to the great depression because as a lot of people started to sell their shares, and there was a lot of unpaid borrowed money. As people started to get into the trend of selling all of their shares for money, all of the stock market at Wall Street crashed and so lots of people were declared bankrupt. There was a lot of panic and most companies failed and had to close down. It really did cause the base for the great depression. With a lot of people in poverty and the death for many companies, there was a great start to the depression.
Secondly, the poverty was also important, but this led a lot from the speculation, because many people started living in poverty. This was second most important, as it also led to many job losses and companies cutting production lines. Also, many unemployment occurred because of this, and so there was a depression of not money for food and to live.
The third most important factor was the farming because, farmers had a lot of surplus food available, and that was too much for America. They joined the poverty when the food became worthless in value and that meant that they also are linked with the second factor. America had too much food, and so farmers lost their jobs.
The final point/ factor is trade. This is when tariffs were implied to America which actually helped it although when put up in other countries, it actually did not let the surplus food get sold to other countries. This did not really affect anyone directly, as the export of food would have only been help.
The most important factor, I thought, was the Speculation although I had some doubts with the poverty. The fact remains however that without speculation, and the Wall Street crash the great depression would not have started because many people were still rich and had a lot of money in the stock exchange.