The Great Depression Case Study! What Really Happened? All You Need To Know! Explained In Simple Words! (#48)

 

Its the time of the 1920's. The US Economy was one of the fastest growing one's.
From the year 1920-1928....
The US Economy grew very rapidly!
Within these years the US Economy was working pretty smoothly!
The companies were manufacturing new goods & products
All the people were buying new stuff from the Companies.... like washing machines & cars, etc.

The banks were giving loans.... which memas people can have more to spend.
The Share Market was also performing pretty well & investors were being able to generate good returns for themselves!
As the companies are getting more funds they are able to manufacture goods in large numbers to meet the grewing demand of the growing population!

So, 'cuz of things were so good from the year 1920-1928 .... we often refer to them as the "Roaring Twenties....
But why don't we call the other upcoming years so?
Heres why?

So now here's a turn OR you know, there was a so called turn within the US Eonomy in the year of 1927, to be exact....! Actually, after looking at the profit the investors were able to generate for themselves.... many people who had 0 knowledge 'bout investing in Share Market entered the Stock Market.... & started investing in companies mindlessly without doing any fundamental analysis! Due to this.... the Stock Prices of the Companies sky rocketed & became overvalued! (SPOLIERS: Not to mentioned, its a Stock Market Bubble that have been formed, here!)

There was a turn/twist in 1927 but still....
1927 is still a part of the "Roaring Twenties" 'cuz the things which'll cause a problem in the smooth functioning of the Economy have sort of started from here but it hasn't been negative for the US Econony IN THE YEAR OF 1927 & NEITHER FOR THE YEAR OF 1928!
It'll make a lot more sense as we move ahead in this article! Overall Share Market went super high.... its generally a bad sign cuz it may fall now but still the high have something to do with growth!

Anyways, so people really invested so much in Share Market.... that by August 1929, the stocks became super duper over valued!

Actually, one more thing I wanna add here is that.... from the beginning of the year 1929, only.... Us Economy's growth process began to slow down a bit.... the Companies production also did slowed down..... & as now the Companies manufactured less.... hence, so now there was less work avaliable at the Companies now in comparison to earlier.... so, many people lost their jobs.... & the one's who didn't lost their jobs had their salaries reduced.
& due to the bad weather the agricultural sector was in trouble & seemed helpless.

So this is clear that it was the start of the Economic Downfall!

But inspite of all this people were still investing in Share Market, mindlessly!
So as I said a while ago; that it was a 'Bubble' going on....
So exactly on October 24, 1929. Its started bursting & we know what happens when a Bubble Bursts....
The prices fall down dramtically within a fee moments & thats exactly what happended here too!
So the Economy was already going down and theres a Bubble Burst!.... on October 29, 1929.... The US Economy went more DOWN! & so, 29 October 1929.... is also known as Black Thursday!

Now you know why after 1929 there are no Roaring 20s.... reason number one the 20's are from 20 to 29....
If talking 'bout why aren't there any other ROARING YEAR(S) after the 20's.... than that's because the Stock Market Bubble Bursted!

Anyways so, its pretty clear with the Economys look.... that there is a Crisis going on here!

The things in the US Economy OR This Crisis went on like this.... for a few years.... from the year 1929 to 1932 ---- to b exact!
But it was a deep Crisis.... actually due to the Bubble Burst.... the Companys Share Prices felled upto 90%.
& so no one was willing to invest in Share Market, now.... & now due to this the businesses got No funds to get back on track!
& on the other hand the people who had lost their jobs weren't spending any money at all!
Which means that they were barely buying any products of/from any Companies!

So now the people of the US started taking out money from the Bank to survive this Crisis!
But Banks ran out of cash, soon! The reason the Banks were already out of cash was that because the Banks had already given loans to the people.
& the Banks were also unable to recover the loans money from people 'cuz many of 'em had lost their jobs!
& so due to this.... the Banks started to fail! ---- Many people lost their Savings of a lifetime!

----So there was a stop or sort of a freeze in the US Economy!

In the year 1933, around 8000 banks had already failed!

The people of US had now.... lost their trust & faith upon the US Banking System!

So now the people had just started keeping their funds at homes, safely!




To help the Economy out.... there just wasn't any money circulated in the Economy by the US Government, inspite of being aware of the current situation of the Economy!

Herbert Hoover (31st US President).... who was the president of the US during the 1929 Crisis.... ---- He didn't really did something helpful for the Economy.... like-- these are some steps he took & there results which weren't at all what the US Economy seeked....

So, Mr. Herbert Hoover thought that, due to the Economic Downfall.... people will have low income. & in order to stop that.... he kept the prices of the goods/consumer products/basic products remain high in costs....
But by this time the poverty had already taken over in the US.... Infact, many people had to sold their houses to arrange money for fooeop to fulfill other basic needs/necessities!

& as the products/goods of the US were too expensive now.... No one in the US had enough funds to afford them. So people started buying stuff/goods/products which were imported by other countries 'cuz they were cheaper in cost than the US prooducts

& now to stop the production of cheap international products.... Mr. Hoover carried the "Howley Tariff Act".... under which the goods that were imported to USA from other countries had high tariffs applied. & due to this the prices of the international products became equal to the US Products!
The sole purpose of this act was to get people to start buying the US products, only!

But this decision was also of no help 'cuz rasing the prices of basic products was only problematic for the US Residents!


So, both the decisions of the US Presisdent: Mr. Herbert Hoover.... were a huge fail & caused the US Economy to fall in Depression from Recession!

In the year 1933, Mr. Franklin Roosevelt became the President of US. He took many helpful decisions within 100 days of becoming a President.
He started many new agencies such as....

Federal Deposit Insurance Corporation (FDIC)
&
Securities & Exchange Commission (SEC)

Heres how these agencies workerd & the impact they had on the US Economy....

So FDIC or Federal Deposit Insurance Corporation; basically insured people that inspite of a bank failing.... they'll definitely get their deposit back!

So people started regaining Confidence & started depositing money in Banks!
With this some money circulated in the Economy! & it really helped the economy quite alot!


& another agency started by Mr. Franklin Roosevelt.... was
SEC / Securities & Exchange Commission

SEC was there to regulate the Share Market of the US.

& apart from all this.... Mr. Roosevelt kept on guiding people via radio to maintain confidence in them so that they get through this Depression!

So far from the year 1933-1936.... The US Economy.... pretty much improved!
But again, in 1939 it struggled just a bit & went down!

& by the start of the World War-2.... US Econony finally recoverd completely from the Depresison!
Actually during World War-2, the US Economy spent a lot of money on the military & troops.... due to which the required amount of money was circulated in the Economy & now the US Economy was finally on track!

So like this the GREAT DEPRESSION went on from 1929 to 1939!

Anyways, so thats all for today!
Thanks For Reading!