The Great Depression
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The Great Depression
The Great Depression hit Americans real hard, almost in an instant. The depression began in late 1929, and lasted for almost a decade. There were many causes of the Great Depression such as uneven distribution of money, farmers crops decreasing, and buying on the margin. All of these factors played a major role in the Great Depression.
National wealth was not spread evenly. Most money was in the hands of a few families who saved or invested rather than spent their money on American products. One problem was that while earnings rose and the rich got richer, the working class received a disproportionally lower percentage of the wealth. This uneven distribution of wealth got so bad that 5% of America earned 33% of the income. This meant was that there was less real spending. Eventually this caused the supplies to be greater than demand. Some people profited, but others did not. Prices went up and Americans could not afford anything. Farmers and workers did not profit, which cause farm prices to go down.
As farm prices decreased, farmers were deeply in debt.Their crop prices dropped too low to allow them to pay off what they owed. Many farmers could not sell all they produced. They began to lose money. Many farmers had to borrow money to buy land and equipment. They could not pay the bank back. Most farmers ended up getting their land seized. This caused many people to become violent, and added a great deal on the Great Depression. Another factor that added to the Great depression was “buying on the margin”.
Buying on the margin is when you pay a small percentage of a stocks price as a down payment, and you barrow the rest. Buying on the margin will only succeeded for a short amount of time, because it only works well if prices continue to rise. If stocks went down for the people buying on the margin, there was no way for them to pay of their loan.