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This self-aggravating process turned a 1930 recession into a 1933 great depression. Fisher's debt-deflation theory initially lacked mainstream influence because of the counter-argument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors).
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- Wall Street Crash of 1929
Crowd gathering on Wall Street after the 1929 crash. The...
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The U.S. crisis in 1929 turned into the Great Depression by...
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The Great Depression, which began in the United States in 1929 and spread worldwide, was the longest and most severe economic downturn in modern history. It was marked by steep declines in industrial production and in prices (deflation), mass unemployment, banking panics, and sharp increases in rates of poverty and homelessness.
What were the causes of the Great Depression?
Four factors played roles of varying importance. (1) The stock market crash of 1929 shattered confidence in the American economy, resulting in sharp reductions in spending and investment. (2) Banking panics in the early 1930s caused many banks to fail, decreasing the pool of money available for loans. (3) The gold standard required foreign central banks to raise interest rates to counteract trade imbalances with the United States, depressing spending and investment in those countries. (4) The Smoot-Hawley Tariff Act (1930) imposed steep tariffs on many industrial and agricultural goods, inviting retaliatory measures that ultimately reduced output and caused global trade to contract.
Read more below: Economic history: Causes of the decline
stock market crash of 1929
Read more about the stock market crash of 1929.
The timing and severity of the Great Depression varied substantially across countries. The Depression was particularly long and severe in the United States and Europe; it was milder in Japan and much of Latin America. Perhaps not surprisingly, the worst depression ever experienced by the world economy stemmed from a multitude of causes. Declines in...
The Great Depression began in the United States as an ordinary recession in the summer of 1929. The downturn became markedly worse, however, in late 1929 and continued until early 1933. Real output and prices fell precipitously. Between the peak and the trough of the downturn, industrial production in the United States declined 47 percent and real gross domestic product (GDP) fell 30 percent. The wholesale price index declined 33 percent (such declines in the price level are referred to as deflation). Although there is some debate about the reliability of the statistics, it is widely agreed that the unemployment rate exceeded 20 percent at its highest point. The severity of the Great Depression in the United States becomes especially clear when it is compared with America’s next worst recession, the Great Recession of 2007–09, during which the country’s real GDP declined just 4.3 percent and the unemployment rate peaked at less than 10 percent.
The Depression affected virtually every country of the world. However, the dates and magnitude of the downturn varied substantially across countries. Great Britain struggled with low growth and recession during most of the second half of the 1920s. The country did not slip into severe depression, however, until early 1930, and its peak-to-trough decline in industrial production was roughly one-third that of the United States. France also experienced a relatively short downturn in the early 1930s. The French recovery in 1932 and 1933, however, was short-lived. French industrial production and prices both fell substantially between 1933 and 1936. Germany’s economy slipped into a downturn early in 1928 and then stabilized before turning down again in the third quarter of 1929. The decline in German industrial production was roughly equal to that in the United States. A number of countries in Latin America fell into depression in late 1928 and early 1929, slightly before the U.S. decline in output. While some less-developed countries experienced severe depressions, others, such as Argentina and Brazil, experienced comparatively mild downturns. Japan also experienced a mild depression, which began relatively late and ended relatively early.
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The general price deflation evident in the United States was also present in other countries. Virtually every industrialized country endured declines in wholesale prices of 30 percent or more between 1929 and 1933. Because of the greater flexibility of the Japanese price structure, deflation in Japan was unusually rapid in 1930 and 1931. This rapid deflation may have helped to keep the decline in Japanese production relatively mild. The prices of primary commodities traded in world markets declined even more dramatically during this period. For example, the prices of coffee, cotton, silk, and rubber were reduced by roughly half just between September 1929 and December 1930. As a result, the terms of trade declined precipitously for producers of primary commodities.
The U.S. recovery began in the spring of 1933. Output grew rapidly in the mid-1930s: real GDP rose at an average rate of 9 percent per year between 1933 and 1937. Output had fallen so deeply in the early years of the 1930s, however, that it remained substantially below its long-run trend path throughout this period. In 1937–38 the United States suffered another severe downturn, but after mid-1938 the American economy grew even more rapidly than in the mid-1930s. The country’s output finally returned to its long-run trend path in 1942.
In the United States, the Great Depression began with the Wall Street Crash of October 1929 and then spread worldwide. The nadir came in 1931–1933, and recovery came in 1940.
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(Top) 1929. 1930. 1931. 1932. 1933. See also. References. Timelines. Further reading. External links. Timeline of the Great Depression. The initial economic collapse which resulted in the Great Depression can be divided into two parts: 1929 to mid-1931, and then mid-1931 to 1933. The initial decline lasted from mid-1929 to mid-1931.
Oct 29, 2009 · The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from the stock market crash of 1929 to 1939. Updated: October 20, 2023 | Original:...
The 1930s. The Great Depression The stock market crash of October 29, 1929 (also known as Black Tuesday) provided a dramatic end to an era of unprecedented, and unprecedentedly lopsided,...
Overview. The Great Depression was the worst economic downturn in US history. It began in 1929 and did not abate until the end of the 1930s. The stock market crash of October 1929 signaled the beginning of the Great Depression. By 1933, unemployment was at 25 percent and more than 5,000 banks had gone out of business.
