The great depression was a period from 1929 to 1939 that was characterized as the darkest economic times in the US history. The depression period was kicked off by the crash of the stock market on Wall Street in October of 1928 wiping out millions of investors.
Cause
In 1929, the market entered an ordinary recession where there was a decline in consumer spending and an increase in products. However, stock prices continued to rise and had reached a level that could not justify future earnings. As a result, individuals who owned the shares began to panic and informed their brokers to sell. It was known as Black Thursday when an estimated 28 million shares were traded in one day. Five days later, Black Tuesday, 16 million shares were traded. At the end of the day, millions of shares traded were made worthless. Brokers who had bought shares on margin, that is to say on loan, ended up losing that money. In lieu of the stock market crash, consumers radically decreased their spending causing factories to have surplus products, which they were unable to sell. In an effort to save money, they laid off workers who were unable to buy the products themselves. With this occurring nationwide, it resulted in a vicious cycle.
Recovery
It took the intervention of Franklin D. Roosevelt who would guide the nation through this. After his election victory, he ordered all banks to close nationwide for a four-day period until he and his government could pass legislation to reopen banks that were deemed worthy. He also broadcasted radio messages that would restore American faith in the economy. Within the first 100 days in office, he passed legislation that was aimed at boosting agricultural and industrial production. In an effort to reform the financial system, he created the federal Deposit Insurance Corporation aimed at protecting depositor's accounts and the Securities and Exchange Commission to regulate the stock market and prevent the level of abuse that led to the crash in the first place.
