In 1929 a severe worldwide economic depression known as the “Great Depression” began. The Great Depression lasted until the late 1930s, early 1940s. The depression started in the U.S in September of 1929 with a decline in the stock market that later collapsed on October 29, 1929.

In the 1920’s the United States economy was thriving. Stocks were bought using credit without worry because values kept increasing. In the 1920’s all investments did well. During this time period there were not government regulations on the purchase and sale of stocks, the value of the stocks resembled little the actual health of the specific industry issuing the stock. Beginning on September 3, 1929, stock prices peaked and then dipped sharply. This continued throughout September and into October. On October 24th 13 million shares changed hands and values collapsed. Tuesday, October 29, 16 million shares were put up for sale without buyers. The stock market collapsed. The collapse of the U.S stock market had devastating effects in almost every country. It affected the lives of every American rich and poor.

There were many reasons that caused the Great Depression. The stock market crash that occurred on Black Tuesday, October 29, 1929 was one of the major causes that led to the Great Depression but it wasn’t the only reason. “Two months after the original crash in October, stockholders had lost more than $40 billion dollars. Even though the stock market began to regain some of its losses, by the end of 1930, it just was not enough and America truly entered what is called the Great Depression.” More than 9,000 banks failed throughout the 1930s. During this time banks did not insure deposits, when the banks failed the customer’s money was lost. The banks that were able to stay afloat were too terrified of the existing economic situation to create new loans which lead to less expenditure. The Government created the Smoot-Hawley Tariff in the 1930s. This tariff charged a high tax for imports which lead to a decline in trade from foreign countries. With the crash of the stock market and the failure of banks people, rich and poor, stopped purchasing goods. With the decline of goods and services demand, the supply as also reduced causing a significant need for labor. As jobs were lost people could not afford to make payments on items bought with credit. The unemployment rate in the United States rose to over 25% and GDP declined by almost 33%.

America’s entry into War World II in 1941 brought the United States out of the depression. Government spending in preparation for the war accelerated the recovery. In 1941 the unemployment rate declined to less than 10%. “In the U.S., massive war spending doubled economic growth rates, either masking the effects of the Depression or essentially ending the Depression. Businessmen ignored the mounting national debt and heavy new taxes, redoubling their efforts for greater output to take advantage of generous government contracts.”