If you thought a Möbius strip had one, or even two sides, you’re horribly wrong. Today, arguing umpteen sides of the same Möbius strip, all with such incorruptibly incontrovertible natures, we have intellectuals screaming possible sagas that might have been singularly responsible for a tragedy. And just in case you’re wondering why you’ve found yourself in the middle of Möbius strips and intellectuals and tragedies in something as vapid to the layman’s mind as a Finance magazine, it makes sense to get to the point without much ado.Yes, we’re talking about the Great Depression of 1929.One of the most striking global events of the 20th Century was, indisputably, The Great Depression.
It was a worldwide economic depression, one that has left its mark on the realm of finance till date.This great occurrence comes with so many theories of possible causes that it only complicates the already arcane picture. Myths, however, must die their own death.The tale eliciting the Wall Street Crash of 1929 as the cause of this financial calamity paints a vivid picture in the researcher-economist’s mind, labeled “Orgy of mad speculation” by Herbert Hoover, the then President of the U.
S.A: the New York Stock Exchange on a Tuesday morning teeming with thousands of shareholders running pell-mell, shouting “Sell! Sell! Sell!” casting forth petulant and thunderous roars of cacophony so much so, that the opening bell was never heard.According to this theory, investors had been buying stocks on credit, people were heavily in debt and consequently, the prices rose to such an extent, that it resulted in a crash. It is said that the kickoff was “Black Thursday,” October 24, 1929.
On this date, 12.9 million shares of stock were sold in one day, and it was triple the usual amount. Five days later, on October 29 or “Black Tuesday,” some 16 million shares were aggressively traded after another wave of panic swept Wall Street. Stock prices fell by 23% and millions of shares ended up worthless, and those investors who had bought stocks on margin were wiped out completely. Another problem at the time was overproduction and underconsumption, which drove prices even lower. Business owners cut wages fearing losing profit.Contrary to popular belief, however, there has been a debacle on the part of those who mistook correlation for cause. It was the inimical economic conditions prior to the Crash that were to be blamed for the Depression, and not the Crash itself.
It is true that the main economic problem was overconsumption in the 1920s fueled by credit and installment, which is, needless to say, pillared on weak foundations. Another major cause was farmers turning to mechanization for expansion in order to feed the soldiers during World War-I. This, in turn, put farmers into debt. Thus, overproduction and low prices led to the farms being closed down, which was a big blow to the agricultural sector. Also, car manufacturing and residential construction had slowed down by 1925.”By 1929, commercial bankers were in the unusual position of loaning more money for stock market and real estate investments than for commercial ventures.
“, says historian David Kennedy.If we were to name a single cause, it would be the American banking system. A vast majority of the banks were individual institutions that relied on their own resources. As depositors rushed with perturbation to take money out of these banks when there was a panic, the latter called in loans and sold assets, ultimately meaning that the credit froze up.
This implied that less money was into circulation, and this led to deflation. There were lay-offs and bankruptcy everywhere. The Federal Reserve did nothing to rescue the banks, to infuse money into the economy or to end the deflationary cycle.The Great Depression saw the once silk-stocking Americans drenched in unemployment, hunger and helplessness. The number of unemployed people reached an alarming 13 million. Many people lived in adversity. Between 1 and 2 million people travelled the country desperately looking for work. Signs saying ‘No Men Wanted’ were displayed all over the nation.
Industrial production dropped by a whopping 45% between 1929 and 1932, and house-building fell by 80 per cent. The banking system of America tumbled down like a house of cards in a storm. 5,000 banks (which had it coming) went out of business in the same period.
About 110 deaths from starvation were recorded, and the other illnesses and deaths were attributed to a lack of nutrition.Source: igcseedexcelhistorynazigermany.weebly.
comGermany and Japan were economically dependent on the global market, so they had effectively signed their own death warrants. Italy went through inflation and shortages and also began to favor the rise of Fascism, and Germany witnessed the phenomenal rise of Hitler and Nazism. Due to enormous silver exports, the Chinese economy was collapsed. Brazil had suffered badly from the devaluation of coffee, which was its main commodity at the time. In South America, many countries had, to a regrettable extent, established strong trade dependencies with the United States, and it caused them to suffer greatly. Chile succumbed too, and was declared by the League of Nations to be the worst affected nation. A 13.5% surge of unemployment struck the Southwest and Midland areas of England, and in the 1930s it ebbed.
The problem was intensified in the North from 1934 to 1935. In fact, in the many cotton mills of New England, wage reductions were brought into effect at breakneck speed. France began to be affected by 1931, but damage done to it was greatly reduced due to its high self-sufficiency.Worldwide trade was greatly impacted, what with countries engaging in “trade wars” by limiting imports. By 1932, global trade crashed to half of its pre-crisis value. Unfortunately, trade wars reached the zenith of intensity— and translated into an actual armed conflict— the World War-II. Herbert Hoover was the American President back then, and showed no urgency in trying to alleviate the issue.
His popularity had plummeted to the nadir by the time of election in 1932, so much so, that it was dangerous for him to go onto the streets campaigning. He did, however set up the Reconstruction Finance Corporation (RFC) which would loan money to companies or local governments that needed it. But it was too late. After his heavy defeat, Hoover told his friends, “we are at the end of our string… there is nothing more we can do”. He lost the polls and his power to Franklin D.