Anis Kazi,11th GradeThe causes of great depression The Great

Anis Kazi,11th GradeThe causes of great depression The Great Depression was a severe economic depression originating in US in 1930’s that lasted until the end of WWII .During the era,the unemployment rate rose to 25% in the US,the worldwide GDP fall by 15%; causing a era full of economy unrest, unemployment and poverty.There were many factors which bundled up to create the depression.But,the three main cause of the depression were:1.Laissez-faire politics. 2.Crash of stock market. 3.Banking system failure.The first cause of the Great Depression was the Laissez Faire Policy of the US government at that time .According to the policy,the government had minimum interference in the domestic economy .The government worked as a silent guard, only intervening in matter such as contract preservation, security etc.The initial purpose of the policy was to alleviate the growth of industry and investment.And to some extent it worked out fine as the real GDP rose to $1.057. But the problem arose,when the economy went to much unregulated.For example, in banking, the federal reserve bank could have prevented the over speculation of stock market by increasing the interest rate in banks to prevent them .But the federal bank just left them with a warning instead of taking actions, which eventually will lead  to fall of the stock market. Likewise, due to the lack of government interference in practises such as monopoly, over production, fraud etc, unrest grew. The effect of this policy was later seen in the sharp decrease of US economic growth rate to -8.5%,  marking the start of Great Depression. Thus, Laissez Faire turned into a curse for the US economy by creating too less involvement of government in business.The second and the most highlighted reason of great depression was the crash of the stock market in 1929. On October 24, 12,894,650 shares were traded. In October 29 as the stock prices started falling down completely, almost 16.4 million shares were traded on the New York Stock Exchange.A huge amount of money were lost, destroying the life of thousands of stock investors. It was the pinnacle of economic strain, after which the US economy started going downhill ,creating the snowball effect which took millions of jobs ,shutting down the lives of thousands of people.As the stock market collapsed,people rushed towards banks to take out their remaining money ,only to have recovered half of it. By 1933, nearly half of America’s banks had failed, and nearly 15 million people became unemployed .Thus, the stock market started the chain cycle of depression ,the effect which continued to the end of second world war.The third cause of the great depression was the failure in Banking system.During the era of great depression, banks were mostly family owned.As the economic depression grew in 1930s, banks began to fail at alarming rates because people didn’t take out loan or invested, as the purchasing power of people decreased.. During the 20s,only 60-70 banks failed annually in average. In 1930 more than 700 banks had failed and later in the decade more than 9000 banks were closed. This caused almost 140 billion dollar disappear from the economy.As the banks began to fail and people started losing money, the trust in the banking sector was lost; people feared to put their money in banks, starting a timespan of mistrust, mismanagement, money preservation complexity etc, which continued for nearly 15-18 years.References:1.Kanopiadmin. “Hoover’s Attack on Laissez-Faire.” Mises Institute, 26 Feb. 2008, mises.org/library/hoovers-attack-laissez-faire.2.Amadeo, Kimberly. “The Strange Ups and Downs of the U.S. Economy Since 1929.” The Balance, www.thebalance.com/us-gdp-by-year-3305543.3.History.com Staff. “Stock Market Crash of 1929.” History.com, A Television Networks, 2010, www.history.com/topics/1929-stock-market-crash.4.www.cland.k12.ky.us/userfiles/13/Classes/441/5%20causes%20of%20the%20great%20depression.pdf?id=8459.5.Luke, / Jim. “Banks Failures: The 1920’s and The Great Depression.” EconProph, 14 Oct. 2012, econproph.com/2009/10/26/fdic-managing-the-crisis-the-fdic-and-rtc-experience/.6.Bank Failures during the 1930s Great Depression, livinghistoryfarm.org/farminginthe30s/money_08.html.