Causes of the Great Depression in the United States in 1927

Taking history as a mirror, we can know the rise and fall. Welcome to the historical view of cloth, I am... Today we are going to talk about the famous Great Depression in the United States. From 1929 to 1933, the economic crisis was like a tsunami, sweeping the whole world.

The main causes of the Great Depression in the United States are: overproduction; The root cause: the shortcomings of the capitalist system.

First of all, because of the contradiction between the socialization of production and the private ownership of the means of production, prosperity has not brought about common prosperity, but on the contrary, it has exacerbated the gap between the rich and the poor. In the United States, for example, by 1929, the income of the rich, who constituted 5 per cent of the population, accounted for almost 1.3 of all incomes, while the poor households with an annual income of about $2,000 accounted for 60 per cent of the total number of households. This is a great dilemma and a huge increase in the purchasing power of society.

Second, even in boom times, the industrial sector was woefully under-launched. A large number of workers lost their jobs. From 1921 to 1929, the average number of unemployed people in the United States was more than 2.2 million per year.

The unemployment rate in Britain was also at its lowest in 1927, while Sweden never fell below 10%. The existence of unemployment necessarily reduces the purchasing power of society and prepares the conditions for a crisis. Third, there is an accumulation of unsalable agricultural products and primary industrial products on the international market.

Such as wheat, sugar, coffee, rubber, copper, etc. Fourth, the real estate and speculation frenzy that accompanied the boom of the 20s (especially the latter type of speculation, which caused the market to soar) increased the instability of financial markets. At the end of August 1928, the average market in the United States was four times what it had been five years earlier.

This unprecedented rampant financial speculation prepared the conditions for the collapse of the monetary and credit system.

The Great Depression in the United States was one of the greatest economic crises of the 20th century, which began in 1929 and lasted until 1939. The main reasons for it can be summarized as follows:

First, the market bubble. In the early twenties of the 20th century, the market was in full swing. People are starting to invest in ** and hope that ** will continue**.

But equity speculation has led to an overheated market, which is out of value. In October 1929, the market crashed, triggering a global financial crisis.

Second, overproduction and overconsumption. The U.S. economy in the twenties of the twentieth century experienced a period of rapid development. The manufacturing industry continues to expand, and products continue to enter the market.

However, many people are unable to purchase these products due to reasons such as income inequality and credit expansion. As a result, the phenomenon of overproduction and underconsumption gradually emerged and was further exacerbated during economic depressions.

Third, the bank went bankrupt. Many banks lent to people who did not have collateral in the boom, and the banks were not well capitalized to cope with the defaults of the large number of borrowers. Eventually, some banks went bankrupt, leading to the collapse of the financial system.

This has led to more and more business bankruptcies and an increase in the number of unemployed.

Fourth, international austerity. In the early twenties of the 20th century, there was a trend of protectionism on a global scale, which led to economic contraction. In the United States, policies such as tariff measures and immigration restrictions have further undermined the international **.

In general, the main causes of the Great Depression in the United States were market bubbles, excessive production and consumption, bank failures, and international austerity. These factors have led to the collapse of the economy, resulting in widespread unemployment and poverty. While the U.S. economy eventually recovered during World War II, the Great Depression made people realize the horror and inadequacy of the economic crisis, providing valuable lessons for future economic policy.

The lack of purchasing power of consumers has led to an increase in goods and difficulties in the export of capital in the operation of the US economy, which has further triggered overproduction and capital oversupply.

In 1963, Friedman and Schwartz published the book "A History of American Money", which explained that the Federal Reserve System, the first bank in the United States, was largely responsible for the stock market crash and the Great Depression, which was originally a normal business contraction, but was caused by the failure of the Federal Reserve's monetary policy and eventually led to the Great Depression

In the 20s before the stock market crash, the U.S. economy grew rapidly, and at the same time, the undercurrents surging in society, such as the increase in non-performing bank assets, the unfair distribution of social wealth, the destruction of social credit, and the distortion of the behavior of listed companies, were all swept away by the rising ** and expectations for future economic growth. The 10-year bull market pushed the Dow from more than 70 points to more than 360 points. Since the expected growth rate of wealth in the United States in the 20s greatly exceeded the speed that the real economy could support, and the society did not have a timely correction mechanism to stop the further separation of the virtual economy and the real economy, the continued expansion of the bubble was inevitable.

It was not until October 29, 1929 that the United States collapsed, the bubble burst, and within two weeks of the stock index, the Great Depression followed, and between 1929 and 1933, the unemployment rate in the United States soared rapidly, reaching an unprecedented 23%, and at the same time there was severe deflation, and the Consumer Index (CPI) fell by 27%. At its lowest point in 1932, the index level was only about 12% of what it was before the crash. Until the end of World War II in 1945, the index was at 153 points, only 42% of the pre-collapse peak.

At that time, under the leadership of Warren Gaymariel Harding, an inappropriate so-called tightening monetary policy was introduced at this time, which eventually led to the stock market crash!

The above is the reason for the Great Depression in the United States in the 30s.

I know that there are two versions of the answer, and I feel that there is some truth to both. Clause.

First, wealth is too concentrated in the hands of a few. Clause.

2. The aggregate demand of society is always less than the productive capacity of industrial society. Both versions are the causes, but who is the main reason, to distinguish for yourself. It is essentially a problem of the capitalist system.