The great depression was the greatest economic crisis in the history of the U.S. There has been many speculations on what conspired to offset it, with experts seeking to understand whether it could have been prevented. Some of the evident causes are as stated below.
In the Jigsaw of the Great Depression (371-371), it is clear that three major players were responsible. These are the collapse of banks, low business and unemployment. In 1929, 641 of the American banks collapsed. This figure escalated in 1931 when about 1700 banks collapsed. Poor financial management could have been the cause since in 1929, the federal government put a limitation on currency and much money was poured to the stock market, causing a crash.
Failure of businesses posed a major threat to the economy. Though president Hoover tried to encourage businesses to co-operate and compete fairly, the businesses seemed to be rolling backwards. The Henry Ford, manufacturer of automobiles, closed down some of its branches interpreting to a loss of 78,000 jobs. On the other hand, the farmers were under pressure to produce more food to satisfy the demand during the World War II. However, they could not produce since they had been badly hit by the crisis. This meant a short supply of food products.
There was uneven distribution of wealth, with the gap between the rich and the poor being quite pronounced. This created economic instability. According to the Jigsaw of Great Depression (370-372), the instability made the people afraid of investing. With people spending less, there was little going to the expansion of businesses, hence business entities ended up closing.
The cycle of the economic crises then continued; poor financial management leading to closure of banks, people losing their jobs and therefore fearing to spend much, leading to the collapse of businesses. This cycle resulted to the great depression.
Work Cited
The Jigsaw of the Great Depression, pp. 370-371.
