The Great Depression in 30th of the 20th century in the USA

Table of contents
Introduction
1. The Great Depression in 30th of the 20th century in the USA
1.1 The beginning of the Great Depression in 20th century in the USA
1.2 The main areas of the Great Depression in the USA
2. Why the Great Depression happened in the USA in 30th of the 20th century?
2.1Main Causes of the Great Depression
2.2Stock market as the main reason of the Great Depression in 30th of the 20th century in the USA
Conclusion
List of literature
Appendix №1
Appendix №2

What turns a usually mild and short recession or "ordinary" business cycle into a great depression is a subject of debate and concern. Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply. Those who believe in a large role for the state in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that compounded the problem.
Current theories may be broadly classified into three main points of view. First, there there are structural theories, most importantly Keynesian, but also including those who point to the breakdown of international trade, and Institutional economists who point to underconsumption and overinvestment (economic bubble), malfeasance by bankers and industrialists, or incompetence by government officials. The consensus viewpoint is that there was a large-scale loss of confidence that led to a sudden reduction in consumption and investment spending. Unfortunately, once panic and deflation set in, many people believed they could make more money by keeping clear of the markets as prices dropped lower and a given amount of money bought ever more goods, exacerbating the drop in demand.
Second there are the monetarists, who believe that the Great Depression started a an ordinary recession, but that significant policy mistakes by monetary authorities (especially the Federal Reserve), caused a shrinking of the money supply greatly which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Related to this explanation are those who point to debt deflation causing those who borrow to owe ever more in real terms.
Lastly, there are various heterodox theories. For example, the Marxist critique of political economy emphasizes the tendency of capitalism to create unbalanced accumulations of wealth, leading to overaccumulations of capital and a repeating cycle of devaluations through economic crises. Marx saw recession and depression as unavoidable under free-market capitalism as there are no restrictions on accumulations of capital other than the market itself. The Austrian school of economics focuses on the macroeconomic effects of money supply, and how central banking decisions can lead to overinvestment (economic bubble).
2.2Stock market as the main reason of the Great Depression in 30th of the 20th century in the USA
When Americans elected Herbert Hoover President in 1928, the mood of the general public was one of optimism and confidence in the United States economy. Most people believed that national prosperity would continue indefinitely. For five years prior to 1929, rising prices typified the stock market.  During this period, American investors enjoyed an enormous "bull market." (The opposite, a market characterized by falling prices, is called a "bear market.").
Americans invested in the stock market for six reasons during the 1920s:
1. Rising stock dividends. New investors entering the market, many who viewed it as an easy way to get rich quick, helped inflate stock prices. Economic historians, however, estimate that a relatively small number of Americans--about 4 million--had investments in the market at any one time. Yet, the constant influx of new investors coming in and old investors moving out ensured that new money was always floating around.
2. Increase in personal savings. Higher wages meant that even average Americans now had surplus money to put into savings or invest in the stock market.
3. Relatively easy money policy. At this time, banks made money more readily available at lower interest rates to more and more people. Although economists debate the actual influence of this phenomenon on the stock market, it's conceivable that many people took out loans not only to buy cars, but also to buy stock.
4. Companies invested their over-production profits in new production.From 1925 on, industry was over-producing. In anticipation of eventually selling the surplus, business leaders funneled their profits right back into industry. They invested in factories and new machinery, and hired more workers, which, in turn, fueled even greater overproduction. This increased production gave the companies an aura of financial soundness, which encouraged Americans to buy more stock.
5. Lack of stock market regulation. At this time, there were no effective legal guidelines on buying and selling stock. Free from such limitations, corporations began printing up more and more common stock. Many investors in the stock market practiced "buying on margin," that is, buying stock on credit. Confident that a given stock's value would rise, an investor put a down payment on the stock, expecting in a few months to pay off the balance of their initial investment while reaping a hefty profit. This investment strategy turned the stock market into a speculative pyramid game, in which most of the money invested in the market didn't actually exist.
6. Psychology of consumption. The Psychology of Consumption fed the optimism of investors and gave them unquestioning faith in prosperity. When the Crash did come, it was even more devastating because of this unquestioned faith.20
Most economists of the 1920s believed that the stock market--not housing starts, sales of durable goods, or the financial health of banks--was the chief indicator of the fiscal health of the United States. In September of 1929, stock prices began to fluctuate, but market analysts dismissed this as temporary. What many of these analysts did not realize--or refused to admit--however, was that stock prices were totally out of proportion to actual profits. Sales of goods and the construction of factories were falling rapidly while stock values continued to climb. Still, very few were worried; they still accepted Adam Smith's "self-adjusting economy" as dogma and believed the problems would correct themselves.
Historians refer to October 24, 1929 as "Black Thursday." On this day, people began dumping their stocks as quickly as they could. Sell orders inundated market exchanges and the bull market suddenly shifted to a bear market. By that evening, J.P. Morgan and other financiers bought up stock to stop the panic and keep the market afloat. On Friday, October 25, the House of Morgan continued to keep the market stable and it seemed that the panic was over. Yet, many investors began to worry during the weekend. George and Martha and thousands of their friends decided to sell whatever stock they still had as soon as the market opened on Monday. As a result, on Monday, October 28, there was another wave of sell orders. The next day, October 29, 1929, "Black Tuesday," was the beginning of the Great Crash.
"Black Tuesday" was the single most devastating financial day in the history of the New York Stock Exchange. Within the first few hours the stock market was open, prices collapsed and wiped out all the financial gains of the previous year. Since most Americans viewed the stock market as the chief indicator of the health of the American economy, the Great Crash shattered public confidence. Between October 29 and November 13, the day when stock prices hit their lowest point, over $30 billion disappeared from the American economy.  This amount was comparable to the total amount of money that the federal government had spent to fight the First World War.
These perplexing economic problems in the United States exacerbated a host of social problems, including:
Unemployment and poverty
Breakdown of families
Soaring high school dropout rates (2 to 4 million)
Homelessness
Organized protests
Around the country, the homeless built settlements of cardboard and tar-paper shacks, called "Hoovervilles" in sardonic reference to President Hoover.
Farmers armed with guns and pitchforks marched on the local banks to prevent foreclosures.
"The Bonus Expeditionary Force." A group of WWI veterans who had been denied their pensions organized the first march on Washington in protest. In 1932, twenty thousand men set up a tent city, vowing to stay until they got their money. President Hoover overreacted and sent in the army (led by future war heroes Douglas MacArthur and Dwight D. Eisenhower) to break up this peaceful demonstration.20
The American public found the "Three B's" responsible for the Crash and the Depression:
Bankers
Brokers
Businessmen
Conclusion
Aside from the Civil War, the Great Depression was the gravest crisis in American history. Just as in the Civil War, the United States appeared—at least at the start of the 1930s—to be falling apart. But for all the turbulence and the panic, the ultimate effects of the Great Depression were less revolutionary than reassuring.
However, the Crash was not the immediate cause of the Depression. It alone was not responsible for a decade of worldwide economic catastrophe. But what was responsible for the Depression? And what were the long-term consequences of the Great Depression in the United States? The Depression itself was responsible for a dramatic transformation in the structure of American politics, for a change in Americans' expectations about government, and for a shift in United States foreign policy during the 1930s. October 29, 1929, was a dark day in history. "Black Tuesday" is the day that the stock market crashed, officially setting off the Great Depression. Unemployment skyrocketed--a quarter of the workforce was without jobs by 1933 and many people became homeless. President Herbert Hoover attempted to handle the crisis but he was unable to improve the situation. In 1932, Franklin Delano Roosevelt was elected president and he promised a "New Deal" for the American people. Congress created The Works Progress Administration (WPA) which offered work relief for thousands of people.
The end to the Great Depression came about in 1941 with America's entry into World War II. America sided with Britain, France and the Soviet Union against Germany, Italy, and Japan. The loss of lives in this war was staggering. The European part of the war ended with Germany's surrender in May 1945. Japan surrendered in September 1945, after the U.S. dropped atomic bombs on Hiroshima and Nagasaki. The Depression was eventually to cause a complete turn-around in economic theory and government policy. In the 1920s governments and business people largely believed, as they had since the 19th century, that prosperity resulted from the least possible government intervention in the domestic economy, from open international relations with little trade discrimination, and from currencies that were fixed in value and readily convertible. Few people would continue to believe this in the 1930s.
List of literature
Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
Ben Bernanke. Essays on the Great Depression. Princeton University Press. ISBN . p. 7
Crashing Hopes: The Great Depression.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
Garraty, John A., The Great Depression: An Inquiry into the causes, course, and Consequences of the Worldwide Depression of the Nineteen-Thirties, as Seen by Contemporaries and in Light of History (1986)
Hall Thomas E. and J. David Ferguson. The Great Depression: An International Disaster of Perverse Economic Policies (1998)
Romer, Christina D., "What Ended the Great Depression", Journal of Economic History, December 1992, vol 52, num 4, pages 757-784
Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html.
The International Depression.
- http://www.english.illinois.edu/maps/depression/about.htm
The Great Depression.- http://en.wikipedia.org/wiki/Great_Depression
The Great Depression.- http://www.ssa.gov/history/bank.html
Appendix №1
Crowd gathering on Wall Street after the 1929 crash. 21
Appendix №2
Crowd at New York's American Union Bank during a bank run early in the Great Depression.22

1 Ben Bernanke. Essays on the Great Depression. Princeton University Press. ISBN . p. 7
2 Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
3 Crashing Hopes: The Great Depression.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
4 Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
5 Hall Thomas E. and J. David Ferguson. The Great Depression: An International Disaster of Perverse Economic Policies (1998)
6 in the same place
7 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html.
8 The International Depression.- http://www.english.illinois.edu/maps/depression/about.htm
9 Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
10 in the same place
11 Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
12 Bernanke, Ben S. "The Macroeconomics of the Great Depression: A Comparative Approach" Journal of Money, Credit & Banking, Vol. 27, 1995
13 Romer, Christina D., "What Ended the Great Depression", Journal of Economic History, December 1992, vol 52, num 4, pages 757-784
14 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
15 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
16 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
17 in the same place
18 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
19 Schultz, Stanley K. (1999). "Crashing Hopes: The Great Depression". American History 102: Civil War to the Present. University of Wisconsin-Madison.- http://us.history.wisc.edu/hist102/lectures/lecture18.html
20 Garraty, John A., The Great Depression: An Inquiry into the causes, course, and Consequences of the Worldwide Depression of the Nineteen-Thirties, as Seen by Contemporaries and in Light of History (1986)
20 Romer, Christina D., "What Ended the Great Depression", Journal of Economic History, December 1992, vol 52, num 4, pages 757-784
21 The Great Depression.- http://en.wikipedia.org/wiki/Great_Depression
22 The Great Depression.- http://www.ssa.gov/history/bank.html
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