At the end of the 1920s, most Americans did not forebode the approaching storm. There had been a steady increase in the share of the largest companies. The volume of industrial and consumer loans was growing. The unemployment rate was in the range of 4-5% of the working-age population. However, nothing just happens, and the Great Depression is no exception. The crisis of 1929, the official starting point of which is considered to be the October collapse of the New York stock exchange, crept unnoticed. There are many complementary versions of the reasons for the U.S. economy recession, still, several causes of the Great Depression are worthy of closer consideration.
First, the events of “black” Friday on October 25, 1929, entailing 4 years of acute economic disaster, were affected by the crisis of overproduction of goods. In those years people were tight of money to consume the goods because of the restrictions on the money supply — the dollars were tied to gold reserves. As a result, many enterprises went bankrupt and investors stopped making payments towards multiple loans. Second, the end of the First World War was due in no small part to the crisis. The American economy was heavily dependent on defence orders, and after the establishment of peace, their number was reduced, which led to a recession in the military-industrial complex. According to economists, the third cause of the Great Depression economists was the inefficient monetary policy of the Federal U.S. reserve system along with the high import duties. The Smoot-Hawley Tariff Act, designed to protect domestic production, led to lower purchasing power.
In addition to these causes, the crisis arose from the whole complex of interrelated factors, including margin loans. At the end of October 1929 on the New York stock exchange prices began to fall sharply, brokers in the mass order demanded repayment of debts on margin loans. But the number of these claims was so big that the banks simply did not have the money, which led to the collapse of the banking system.
The complex of these factors led to dramatic consequences for the United States. Within a long period, Americans had to experience rising unemployment, lower incomes, the bankruptcy of many banks and enterprises, the decline of industry and agriculture, demographic crisis, the decline of the international influence of the United States.
At the end of the 1920s, most Americans did not forebode the approaching storm. There had been a steady increase in the share of the largest companies. The volume of industrial and consumer loans was growing. The unemployment rate was in the range of 4-5% of the working-age population. However, nothing just happens, and the Great Depression is no exception.