What is a Depression?
A Depression is a period of a severe economic slowdown, effecting economic activity the world over. The only Depression of modern history is the Great Depression that took place in the first half of the twentieth century.
The best accepted start of the Great Depression is "Black Tuesday," October 29, 1929. On this historical date the U.S. stock market crashed, meaning a great amount of value was lost in that single day. The repercussions were enormous. Eventually most of the world was dragged down into an economic slump.
Interestingly, levels in the stock market returned to what they were before the crash within a year, give or take, but the disaster had spread beyond the stock market. Although by the latter part of 1930, one year later, businesses and government were spending (a positive economic activity), households were devastated and therefore were not buying. In 1930 interest rates were low and households could borrow, but most would not. This then prolonged the inactive economy and workers were laid off. The inactivity of households to become less risk adverse kept the economy in dire straights for many years. In 1933 the unemployment rate reached its highest level, with 15,000,000 million people unable to find work (a staggering 25% of the work force).
Although the Great Depression is recognized to have started on that single day of the stock market collapse, in fact there were many complex economic interactions at play during the prosperous 1920s that created the conditions for the Depression to happen.
There is no single point that is recognized as the end of the Great Depression. Opinions on the time of the turnaround to positive economic activity range from the mid-1930s to the early 1940s. Just as varied are the actions given credit to the end of the depression. These include manipulations of the Gold Standard, the new government programs initiated by the "New Deal" and the increased activity of World War II.
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Interestingly, levels in the stock market returned to what they were before the crash within a year, give or take, but the disaster had spread beyond the stock market. Although by the latter part of 1930, one year later, businesses and government were spending (a positive economic activity), households were devastated and therefore were not buying. In 1930 interest rates were low and households could borrow, but most would not. This then prolonged the inactive economy and workers were laid off. The inactivity of households to become less risk adverse kept the economy in dire straights for many years. In 1933 the unemployment rate reached its highest level, with 15,000,000 million people unable to find work (a staggering 25% of the work force).
Although the Great Depression is recognized to have started on that single day of the stock market collapse, in fact there were many complex economic interactions at play during the prosperous 1920s that created the conditions for the Depression to happen.
There is no single point that is recognized as the end of the Great Depression. Opinions on the time of the turnaround to positive economic activity range from the mid-1930s to the early 1940s. Just as varied are the actions given credit to the end of the depression. These include manipulations of the Gold Standard, the new government programs initiated by the "New Deal" and the increased activity of World War II.
Read more: