Essay About Extensive Stock Market Speculation And Nations Total Income Rose

The Great Depression
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The Great Depression 5
The Great Depression was the worst economic downturn ever in U.S. History, and one
which extended to practically the entire industrialized world. The Depression began late in
1929 and lasted for about ten years. Many economists have their theories as to what
brought all of this about. It is generally accepted that the main cause for the Great
Depression was the combination of the greatly unequal distribution of wealth throughout
the 1920s, and the extensive stock market speculation that took place during the latter
part that same decade. The disparity in the distribution of wealth in the 1920s existed on
many levels. Money was distributed unequally between the rich and the middle-class,
between industry and agriculture within the United States, and between the U.S. and
Europe. This imbalance of wealth created an unstable economy. The excessive
speculation in the late 1920s kept the stock market artificially high, and eventually lead to
huge market crashes. These market crashes, combined with the maldistribution of wealth,
caused the American economy to capsize. Lives and livelihoods of the lower economic
groups were devastated. Politicians were no longer admired and the strain between the
races was high. Through it all, however, the people were able to find moments of relief in
entertainment of many kinds. They all pulled together to stretch what little they had and
found strength in themselves that they never realized was there.
The “roaring twenties” was an era when our country prospered tremendously. The
nations total income rose from $74.3 billion in 1923 to $89 billion in 1929. The rewards
of the “Coolidge Prosperity” of the 1920s were not shared evenly among all Americans,
however. The top 0.1% of Americans had a combined income equal to the bottom 42%!
The same top 0.1% of Americans in 1929 controlled 34% of all savings, while 80% of
Americans had no savings at all. The disparity of income between the rich and the middle
class grew throughout the 1920s. A major reason for this large and growing gap between
the rich and the working-class people was the increased manufacturing output throughout
this period. The large and growing dissimilarity of wealth between the well-to-do and the
middle-income citizens made the U.S. economy unstable. For an economy to function
properly, total demand must equal total supply. In an economy with such disparate
distribution of income, it is not granted that demand will always equal supply. In just
three years a whole decade of economic growth was wiped out. The first three waves of
bank failures began in the fall of 1930. While bank failures were common in the 1920s,
many more banks failed in the 1930s, and, unlike in the 1920s, there was a large decline in
the money supply. Made fearful by the huge number of banks that failed, surviving banks
cut back on their lending, and the public reduced their bank balances. Between 1929 and
1933, the nations money supply declined by over 25 percent.
The federal government also contributed to the gap between the rich and
middle-class. The Roaring Twenties was an era dominated by Republican presidents:
Warren Harding (1920-1923), Calvin Coolidge (1923-1929) and Herbert Hoover
(1929-1933). Under their conservative economic philosophy of laissez-faire (“leave it
alone”), markets were allowed to operate without government interference.