The great depression - Essay Example

strophic collapse of stock-market prices on the New York Stock Exchange (“Black Thursday") in October 1929 remains the most severe economic depression experienced in America (Modern American Poetry1). Various factors caused the great depression. Apparently, the boom psychology and speculative euphoria resulted in underlying weaknesses and imbalances within the U.S. economy that caused the great depression (Modern American Poetry1). The federal government and financial institutions lacked capacity to address the underlying weaknesses and economic imbalances.

Indeed, the American government could not sustain the rising personal debt, increased production of goods, and imbalance between the rich and the poor leading to the stock market crash of 1929. Economists assumed this was simply a correction of the market and hence did nothing to contain the situation. President Herbert Hoover underestimated the severity of the crisis and assured U.S citizens that the economic slump would not last for more than 60 days (WGBH Educational Foundation 1). Herbert did not consider government’s intervention on the matter.

Consequently, stock prices continued to fall in America. By the end of 1932, stock prices had dropped to 20 % of their 1929 value. Apparently, the great depression started in America and spread to other industrialized nations across the globe between late 1929 and early 1940s. The U.S had forged fundamental relationships with other European economies after the First World War that allowed the great depression to turn into a global economic crash (Modern American Poetry1). The First World War, war debts, and the need to pay reparations (Modern American Poetry1) weakened European economies forcing them to rely on America, which was the chief creditor after the war (Quah and Crowley 8).

As such, the economic slump in America and the depreciation of the American investment credits to Europe fostered economic challenges in Europe. Ideally, countries that were deeply