The roaring 20's led to the great depression?

Question

the era known as the roaring 20's was a time of change in the united states. This change was cultural, political, and economic. This change also hid many underlined problems in the united states. the problems would later manifest themselves as the event know as the great depression ? to what length is this statement true

Answer 1

You may want to 'bone up' on your Great Depression history. Try reading anything about that era written by the brilliant historian Paul Johnson (e.g. "Modern Times" or "A History of the American People").



The Great Depression was a DIRECT consequence of misconceived government interference in the economy after the market crashed. The feds deflated the dollar when they should have left it alone (or inflated it). The feds raised taxes when they should have lowered them. The feds passed the Smoot-Hawley Act that destroyed international trade (killing millions of U.S. jobs!).



Then, in the late 1930s, FDR got his New Deal accepted by the Supreme Court (they had previously ruled it unconstitutional - because it was unconstitutional). When the New Deal went into effect, the economy crashed again - creating the second phase of depression, the so-called FDR

Depression.



Do a little reading on this subject. There is a lot to be learned about how government screws things up and the 'little people' pay the price.



It is important to study this past time period, because we currently have two presidential candidates who want to implement some of the same government programs/policies that created the Great Depression. It is more than coincidence that our economy is faltering (markets look forward in anticapation of future realities) in response to rational fears that these candidates may be successful in implementing their disastorous ideas. History does repeat itself - primarily because most people never take the time to study it!

Answer 2

There was the whole problem of automation in manufacturing.Machinery had forced people off of the farms and by 1925 it was forcing them out of the factories.

The idea that companies were profitting immensely was true, but the general working population was hurting.

Not only were jobs lost to machines but the newly unemployed were willing to take your remaining jobs for less money than the people still working.

Employers drove general wages so low that people could not afford houses or even shoes.

Of course now they had factories able to produce like never before but they had nobody able to buy their products.

The result was a sudden drop in profits.

That is what triggered the sell off of stocks as people tried to cover their losses.

The business people called it *overproduction* and shut factories



So now the factories shut unemploying more people, who underbid each other for what jobs were left. Which meant they could afford to buy even less, which meant more jobs lost etc etc.



This problem was encountered in every industrialized nation.

It was not until they increased wages and cut back hours that things improved really.

Yes it is true that the WW II soaked up a lot of the unemployed, and got the factories producing again but it would have collapsed into the same mess all over again after the war without the wage increases and reduced hours.

We appear to be in much the same situation today as was seen in the 1920s.

On other feature was that the rich suddenly faced taxes that they had never experienced before during the 1940s.

This was done to bring the levels of wealth concentration down.

We are also seeing the similar levels of wealth concentration as existed in the late 1920s and 1930s.



So the problem was not the lending system that caused the depression. The problems were much more fundamental and are a basic problem with classic capitalist theory.



Think of a Monopoly game. Early in the game everybody is buying and selling, the money is changing hands, but at the end of the game one person owns everything and there is no economic activity of any sort.

Answer 3

Yes - the roaring 20s were a time of economic boom and prosperity. An example proving your statement was with the credit policy - with the surge of automobile production during the 20s, cars were sold on credit for very much of the decade. However, when the depression hit, things went bust and there was just no money to pay for the car anymore. Also, there was a MUCH higher # of people investing in the stock market in '28-29 rather than the early 20s, which led to the collapse of the stock market.

Answer 4

The causes of the Great Depression were numerous. It is hard to pinpoint into main problem, but the overproduction and overcapacity was definitely a major issue, as well was imbalances in US internal economy and world trade. The first sign of the economical troubles flared in the agricultural production, which was still very vital part of US and world economy. Agricultural products were accumulating while their prices were failing leading to recession in the farm industry already in 1928. Many farms were going under and with it also financial market tied to this sector. Surplus of sugar and other products in Europe also cut demand for them, cutting vital American exports to fall down. However, at the same time, the stock market and credit peaked while everywhere else the problem from farm industry started to spread out into general economy. Industrial production was falling six months in row prior stock market crash, and companies were left with mushrooming inventories. International imbalances played also key part. The stock market crashed when British and Dutch investment companies suddenly started to sell their shares on New York exchange and causing panic. Some banks holding on real estate were already in troubles thanks to Florida land crash as results of two hurricanes striking the same area in 1926-1928. The real problem of the economy was too much credit, while income of the majority people barely grew through the decade. Some countries, while enjoying relatively prosperous 1920's did not have widespread economic boom, which was the case of Germany and Austria. European capital was depleted after Great War, and especially German capital was depended on US capital. When economy in USA was going down, rest of the Europe was dragged with it as well. The governments did not know how to response into red flags that were showing up in the economical charts in the late 1920's and their actions were outright wrong or incorrect dealing with them.

Answer 5

I'd say that statement is too much of a generalization. It's like saying 1928 led to 1929. As soon as the US became a truly industrial society (sometime in the mid-19th Century) we got stuck with the regular up and down economic cycles of the modern world economy. There were economic depressions before the 30s (a big one in the 1870s) and there were economic depressions after the 30s (the 1970s). Some say were heading for another economic depression now. I think the most you could accurately say is that the exuberance of the 20s and a lack of government economic controls allowed the economy to grow excessively in a "up" cycle which led to a worse-than-ever-before "down" cycle. Nowadays the Federal Reserve Bank raises interest rates in boom times and lowers them in recessions to hopefully prevent such massive swings in the economy.

Answer 6

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Answer 7

It's kind of true. People in the roaring 20s were obsessed with the new technology that were out and readily available such as automobiles, radios, refrigerators, etc. They really couldn't afford such products, so they took out large loans from the banks. People were borrowing so much money that the banks were taking money out of people's savings account to give out as loans. When things started to get bad during after the stock market crash, some people became nervous and started to withdraw their money from the banks. However, most of the people who took out loans didn't have the money do pay them back, so the banks were out of money and were forced to go into bankruptcy. Back then, banks weren't insured by the federal government, so if the banks closed, you lost all your money. It really made things worse.

Answer 8

The basic point of it all was borrowed money in the hopes of returns that never came. Loans were called in for payment, and there was not enough money to cover the debts. That was the underlying cause of the great depression.

Answer 9

roaring 20led great depression