The Great Depression of the 1930's - Research Paper Example

The depression not only resulted in loss of jobs, but also resulted in psychological crisis which was attributed to loss of income and property, and the resultant sense of gloom which was endured by the country during those tragic years. Such events put the government and the Federal Reserve under great pressure to safeguard the rapidly deteriorating economy from worsening further and eliminate the social and commercial crisis faced by its people (Campbell, 2008). The exact reasons which led to the great depression are highly complicated in nature, and have been the subject of various debates among historians.

Initially during the beginning of 1920s, the nation’s economy was relatively strong and consumer-oriented, with a booming automobile and consumer goods industry which produced products in large numbers to cater to the wide market. This could be substantiated with the presence of large companies such as General Motors and General Electric, which were not only successful in the consumer goods market but also a major source of investments in the New York Stock Exchange along with other financial markets.

The stock markets and financial institutions prospered greatly during those years, which led to a huge investment in those sectors, leading to an unprecedented rise in stock prices. The government concern increased, with the increase in stock prices, and the Federal Reserve along with the government began to introduce and develop policy measures to control the rising stock prices. Such measures taken by the government and the Federal Reserve paved way for the impending crash of the stock market, which began during October 1929.

Although historians so far, have failed to pinpoint one single event which led to the collapse of the stock markets, and the resultant economic downturn that followed, resulting in billions of dollars worth of loss, large scale unemployment, failure of banks, and years of economic and social unrest. Timeline history of the period Year Events 1929 Feb 2 Federal Reserve Bank bans bank loans for margin trades June 15 - August Agricultural Marketing Act passed, Economic expansion peaks Sept, 3 Stock prices peak Oct 24, Oct 29 Black Thursday, sales of stocks was recorded at an all time high of 12,895,000, and 16,410,000 respectively resulting in a record forty points drop in the New York Times index Nov 13 Stock prices record a new low 1930 October Unemployment rises, Committee for unemployment relief formed Dec 2 Government funds a $150 million public works program.

By the end of 1930, nearly 1350 banks suspend their operations 1931 Official report suggests that nearly 4-5 million people were unemployed Oct 16 New York Federal Bank increases its discount rate from 1.5 per cent to 2.5 per cent Oct 23 New York Federal Bank once again increases its discount rate from 2.5 per cent to 3.5 per cent Dec 11 New York Bank collapses. By the end of the year nearly 2293 banks shut down Lack of economic safeguards During the depression there was large scale unemployment, various banking and other financial institutions failed and had to shut down, and there was a sharp decline in the GNP leading to disastrous outcomes.

Such widespread and negative repercussions were mainly as a result of lack