A Simplistic Perspective about the Catastrophe of The Great Depression (1929-1941)

　 Eight decades ago, millions of Americans felt the pinch - the wealthy buried their money, banks had no liquidity, and heavy customs barriers were put up while imports were stopped. Businesses went bankrupt, workers were sent home, and eventually one in every four workers was unemployed as disposable income dropped 28%, while the tax rate reached 91%. The stock market crashed and hit rock bottom as the US Government did not have a single policy in action that was either useless or made matters even worse. These calamities are the core characteristics of the Great Depression.
　　Over the years, many textbooks and economists have critiqued the fiasco of laissez -fair capitalism and the unchecked free market economy as the core causes of the Great Depression. As a result, they argue that the only way to put the American economy back on path was to introduce government intervention. Specifically, the central ideas of Keynesian economics is that active government regulation in the free market, centralizing the monetary policy, and controlling government spending, the money supply, and taxation would ensure not only economic growth, but economic stability.
　　The Great Depression was by far the longest economic depression experienced by the United States, lasting over 3 times longer than the previous downturn. The US economy broke down during the presidency of Herbert Hoover, and can be attributed to many of the following factors.
　　The Wall Street Crash of 1929 and ineffective monetary policy:
　　By far the single largest contributor to the Great Depression was a manipulation of the stock market through marginal lending - the practice of borrowing money to buy stocks. Coupled with the loose regulation of marginal requirements, which controls the share of the purchase that must be made in cash, marginal lending led to a very high risk investment. In other words, complete mismanagement of the money and credit markets.
　　An ordinary recession engulfed the American economy during the summer of 1929. It had been observed that a drop in consumer spending occurred as the stock market continued its climb, which is also known as a "bull market". Preferably, under normal conditions, a bull market, falling prices eventually lead to a slowdown, known as a "bear market". As prices fell along with investor confidence, shares were sold en masse to avoid capital loss.
　　By October 23rd, 1920, 6 million shares had changed hands in a mass selloff, and the stock market bubble burst. Adding fuel to the fire was speculation across Wall Street that a further fall in share prices would hit even harder the next day. The day now known as "Black Thursday" experienced a record of 12.9 million shares being traded. Thousands of investors who relied on marginal trading with borrowed money saw their assets completely wiped out as their shares were now worthless. Among the biggest losers were wealthy celebrities, Winston Churchill, Clarence Bridseye, who developed the first packaged frozen foods, and William C. Durant, the founder of General Motors.
　　Bank Closures Deepened the Great Depression:
　　As stocks took a beating, consumer confidence vanished, investments came to a standstill, production slowed, and wages fell drastically for those who weren't even worse, the banking panic erupted. A large number of depositors lost confidence in the solvency of their banks, which had invested large portions of their savings in the stock market. As a result of the fear of losing their savings and other liquid assets, customs rushed to the banks to withdraw all their cash and deposits. These massive withdrawals, investment losses, and increasing non- performing loans left banks with insufficient cash reserve. By early 1933, over 1000 banks had shut down, and nearly 4000 were suspended. President Hoover attempted to stem the situation by supporting failing banks with government loans, hoping that banks would provide loans to businesses which would in turn hire employees back.
　　Severe Drought and the Dust Bowl:
　　In 1930, a severe drought and strong winds, lasting 4 years, eroded the fine soil of the Great Plains. Known as the"Dust Bowl", huge dust storms caused major damage to the heart of American agriculture. The driest regions included southeast Colarado, southwest Kansas, the panhandles of Oklahoma, and Texas. Later, most of the country felt the effects of the Dust Bowl. By 1932, 14 dust storms were recorded, and in 1934, 38 more had hit the plains.
　　The severe dust storms destroyed everything in their paths, leaving farmers without any crops. They were not only unable to feed their families, but debts could not be repaid, and small farms were faced with foreclosure from banks and lenders. People stayed in a shantytowns known as ("Hoovervilles") outside town. Housing in these shantytowns was built from any materials that could be scavenged, including driftwood, cardboard, and even newspaper. Newspaper became known as "Hoover Blankets", while broken down automobiles now pulled by horses became known as "Hoover Wagons". Many residents of Kansas and Oklahoma fell ill and lost their lives to dust pneumonia or malnutrition.
　　Birth of the New Deal:
　　Frankin D. Roosevelt took the helm of presidency after defeating Hoover in the election of 1932. His recovery pledged to help the "forgotten man at the bottom of the economic pyramid". In President Roosevelt's inaugural address, he asserted optimism - "the only thing that we have to fear is fear itself", and raised the hopes of millions of Americans who depended on the president to solve their woes. Before enacting the New Deal programs, Hoover ordered a 4 day holiday for all banks to induce stability.
　　Some of the most prominent New Deal Programs were:
　　The Agricultural Adjustment Act (AAA): Its purpose was to reduce crop surpluses by giving farmers subsidies to not plant excess crops and to kill off excess livestock. This would in turn raise the value of crops.
　　The Civilian Conservation Corps (CCC): Encompassing everything from transportation infrastructure to bridges and vegetation coverings to mosquito control, this was a series of public work relief programs for unemployed youth between the ages of 18 and 25. It provided jobs for both skilled and unskilled laborers, lasting from 1933 to 1942. In these 9 years, 2.5 million young men participated in CCC.
　　The Work Progress Administration (WPA): This was a public works project that predominately involved the construction of public buildings and roads. The WPA provided 8 million jobs between 1935 and 1943, ending on June 30, 1943 due to low unemployment.
　　Emergency Banking Act (EBA): This act allowed only Federal Reserve approved banks to operate in the United States of America. This act was miraculously passed in favor by most legislators who had not even read it, as only a single copy was available on the floor. The Federal Reserve, a central banking agency, committed to supply currency, reopened viable banks, and regulated the banking system in order to restore depositor confidence.
　　Farm Credit act (FCA): The FCA provided direct loans for agriculture purposes, and opened banks to serve the agricultural sectors.
　　Social Security Act (SSA): Then the United States was the only industrialized country in the world without social security. The congress enacted the Social Security Act of 1935 to provide pensions to the aging and retired, benefit payments to dependent mothers and the handicapped, and also provided limited unemployment insurance.
　　Abandoning the Gold Standard: Under the gold standard, the money supply was limited to equal the total amount of gold held by the United States. FDR took the US Dollar off the gold standard, which devalued it by 40%, but allowed for greater liquidity and growth. The removal of Gold Standard and its efforts on the economy are still debated today.
　　Finally, America entered a period of rapid industrialization, urbanization and economic growth as it begins to participate in World War II.