Were some of the factors that contributed to the Great Depression? 10 points bes

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Question:

Please tell me what the facters were!. do they even had factos that contributed to the great depresstion!.
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Best Answer - Chosen by Asker:

It was after world war II when the economy crashed!. Many recognize it as the stock market in NY crashing, but it's actually affects places all around the world!. Main reasons for this great depression are
1)the increasing debt to fund the war
2)the higher demands on crops and product and putting many farmers out of business
3)The unbelievable lowered price on everything

These are a quick few that are on the top of my head, if you want fuller details, go to wikipedia =D Good luck

http://en!.wikipedia!.org/wiki/Great_Depre!.!.!.Www@QuestionHome@Com

The stock market crashWww@QuestionHome@Com

What Caused the Great Depression!?

There are several explanations for what happened but the most obvious conclusion is that it was the confluence of several shortsighted and commiserating factors!. Three main themes emerge: historical factors, central bank policies, and political decision making!. For the purposes of this discussion the focus will be on the United States!.

The US in the 1920's: Buying into the Boom

The 1929 stock market crash marked the beginning of the Depression!. Prior to the crash the stock market had been an important source of funding for industry; thus the crash itself was a contributing factor to the downturn as well as a harbinger of things to come!. Since stock prices are based on estimates of future earnings potential, the stock market performance of the 1920's tells a story of runaway optimism for the future!. When it peaked a few weeks before the crash, The Dow Jones had risen 597% over the previous 8 years!. It was soon to become a symbol of runaway pessimism!.

The freeing of capital from government use to commercial use following World War I caused commodity prices to inflate!. In 1920, Ben Strong of the US Federal Reserve Bank of New York raised interest rates sharply to prevent inflation!. This caused a recession and the stock market to fall!. Once hard assets like commodities and real estate were no longer rising in price, money began to pour into stocks and bonds!. The Dow started climbing from its low at 63!.90 in 1921 and rose 150% over the four years to 1925!.

According to Ron Chernow, in "The House of Morgan", It was in 1925 that Ben Strong made a secret commitment to Montague Norman, Governor of the Bank of England, to help England reinstate the Gold Standard!. This action would later be shown to have undermined the British economy but the Pound had been the main medium of international exchange at that time and it was felt to be in everyone's interest to have it be exchangeable for gold!. With moral support from the US Treasury, Strong chose to help strengthen the value of the Pound by depressing US interest rates!. This depressed the value of the US Dollar and caused the already robust economy to boom!.

It was suddenly cheaper to borrow money to invest in the stock market (called margin investing)!. Since the Dow had risen steadily since 1921, "small investors leapt giddily into the stock market in large numbers"!. The margin requirement at that time was only 10%, meaning you could buy $10,000 worth of stock with only $1,000 down, borrowing the rest!. With artificially low interest rates and a booming economy people and companies were more apt than ever to invest in grandiose business expansions and over-priced stocks!. Mergers and acquisitions soared!.

In 1927, Britain ran into trouble with its gold standard again and Ben Strong lowered US interest rates in sympathy for a second time!. This ignited the boom into the speculative frenzy that brought the market to its peak on September 3, 1929!. It was like pouring gasoline onto a fire - the flames rose up, no lasting fuel was added, but the economy sure looked great!.

Ben Strong died in October 1928!. George Harrison, his successor immediately lobbied for higher interest rates to cool the speculative fervor!. Rates were finally raised 1% in August of 1929, but by then it was way too late!. The Dow peaked at 381!.17!.

The market and the economy had buoyed itself from one source of hope to the next for a whole decade!. First it was the end of war-related inflation and booming exports for war reparations, next artificially low interest rates in 1925 and 1927 and booming exports due to a reduced value of the Dollar vs!. the Pound!. There were major tax reductions instituted by the Republicans under Hoover and finally in June of 1929 an international accord was struck with the Germans (albeit short-lived) over the financing of war reparations, a major issue of the decade!.

By Monday, October 28, 1929 the Dow had fallen 20% to 300!. It fell 40 more points that day and another 30 on Tuesday (Tragic Tuesday) to reach a temporary bottom at 230!.07!. It was down 40% from the peak 56 days earlier!.

George Harrison bravely stepped in to provide tremendous amounts of credit to the banking system!. This action prevented immediate bank failures and bankruptcies and a total collapse!. The market recovered a good bit of ground but began to fall again before year-end!. By mid-1930 this liberal credit policy was to be reversed affecting the money supply crisis discussed below!.

In early 1930, there were 60 bank failures per month in the US but when the Fed tightened its purse strings, things got much worse!. 254 banks failed in November and 344 in December of 1930!. Among these was the Bank of the United States, with 450,000 depositors it was the fourth largest bank in New York!. Although it was a private bank, "The biggest bank failure in American history, the Bank of the United States bankruptcy fed a psychology of fear that gripped depositors across the country!."

In spite of further tax cuts, public works programs and optimistic speeches, spending and thus economic activity just kept going down!. The stock market would make temporary recoveries, sucking buyers in, only to free fall again!. The Dow finally hit bottom at the level of 41!.22 on July 8, 1932, 10!.5% of its peak three years prior!.

Interestingly, various bankers, government officials, and academics chose this three-year period to expound righteous advocacy of personal, corporate, and governmental frugality and restraint!. "Leadership" that was so lacking when it could have helped in the frenetic 1920s!. John Maynard Keynes, the famous British economist whose economic stabilization theories would greatly influence the recovery in years to come, however, warned such austerity would only deepen the depression!. As we will see, truly it did!.Www@QuestionHome@Com