The Great Depression: What it is and Who is to Blame
You have probably heard of the Great Depression. It began in late 1929, when the popular economist Herbert Hoover became president, and ended in 1933, Herbert Hoover’s last year of presidency. The Great Depression lasted throughout the term of president Hoover, so is he to blame? Or, is it the fault of another president? H. Hoover receives most of the blame but, is it his fault?
Herbert Hoover was born in 1874. He attended Stanford University in California in the year 1891. After he graduated in 1895, he traveled around the world as a mining consultant from 1897 to 1817. He was familiar with economics and was asked to run the U.S Food Administration. He was said to have done a good job because he would try to give food to as many people as possible. In 1918 he was asked by the president at the time to be the Director of the President’s Supreme Economic Council. He was also the Head of the European Relief and Rehabilitaion Administration. As the Head, he helped feed over 20 countries across Europe. By the time he ran for president he was a well known humanitarian and economist. He won by a landslide in the 1928 election but lost terribly in the 1932 election. How did this famous humanitarian and economist become so despised? He was president during the Great Depression.
The Great Depression began in October, 1929 when the Dow Jones Indutrial average dropped about 24%. This crash led to the Great Depression when it destroyed the confidance of Wall Street markets. The crash of 1929 would lead to one of the darkest times in American economics. Over the course of the next four years things would only get worse. The stock market would plunge a total of around 89%. 13 million Americans would loose their jobs. The unemployment rate would go from 3% to 25%. The president would try to do his best to help while conforming to his own economic and political beliefs.
Many people believe that Herbert Hoover did not do anything to help the country during the Great Depression. This is not the case. He established several commitees to create work such as the Federal Farm Board. Through public work projects, he created indirect relief programs in order to help the unemployed. He told businesses to cut wages instead of laying off employes. Herbert refused to create direct relief for the people because he believed it would make them lazy. In addition, he would not use a Welfare program because he thought it would cause the U.S. to be in a lot of debt.
The Great Depression began only 7 months in to his presidency. Although many say it is mainly his fault that is not true. One of the many factors that caused the crash of 1929 includes the rapid market expansion that occurred in the early and mid 1920’s. What caused everything to go downhill if everything was going great? There are many different theories. One theory says that it is the fault of the government. In August, 1829, the Federal Reserve Bank of New York raised the intrest rates from 5% to 6% because the economy was doing great. This then led to the cooling of invester excitement which then led to affected market stability and quickly reduced econmic growth.
While some blame the government, others blame the people and the banks. Some economists say that the people trusted in the economy and bank too much. In the 1920’s there was a fast increase in bank credits and loans that the average American could easily receive access to. People were so confident and trusting in the economy and bank that they didn’t care if they were in debt. People wouldn’t rush to pay of dept. This caused the bank to ‘hand out’ money that they did not have because people were not rushing to pay of debt. Often times when banks lend too much money they do not have it can lead to a crash in the market. There are many different theories and causes that may have affected the stock market which led to the economic crash of 1929.
Since, before the crash, the economy was doing better than ever, when the crash occured and the stock market dropped 11% on that October 24, people panicked. Four days after October 24, the stock market droped another 13%. The following day, October 29th, the stock market plunged another 12%. People began to panic. This would lead to the Great Depression.
The exact causes of the Great Depression are a common debate among investors today but there are many strong theories with valid evidence that state what led to the famous crash of 1929. Some say Herbert Hoover, while others say it was the overconfident public. Most economists agree that there were many factors and it was not the sole fault of any one person.
