In October of 1929, the United States stock market began a steep decline that signaled the beginning of a long economic downturn known as the Great Depression. In a matter of weeks, investors lost enormous sums of money as the value of their investments in stocks, bonds, and real estate plunged. By the early 1930s, the stock market had lost nearly 90% of the value it held in the late 1920s.
As for the Great Depression, the term refers to the years from roughly 1930 to 1939 when the United States economy contracted. U.S. economic growth slowed significantly. The U.S. Gross National Product (GNP then, today we use GDP or Gross Domestic Product to measure total annual output of goods and services by the economy) declined for several years. In currency markets, the economy had a rare experience with price deflation and a deflationary spiral. People stopped spending, so stores cut their prices. Then, hoping for even better deals and lower prices, people spent even less because they assumed that prices would drop if they waited long enough. The problems with deflation is that it causes consumers to slow their spending dramatically, and, when shoppers stop shopping, stores cannot sell their products. When stores could not sell their products in the 1930s, they went out of business. When stores went out of business the companies who supplied them no longer had clients to whom they could sell, so they too went out of business too. As stores and factories shut down, the people who had worked in them lost their jobs. Estimates of unemployment during the Great Depresssion vary, but most economic historians agree that the unemployment rate reached at least 25% during the early 1930s. When people lost their jobs, they lost the income they needed to buy things as basic as food and shelter. As a result, a large portion of the U.S. population had no money, little food, and no homes. In cities across the nation, shantytowns of homeless Americans sprung up in the shadow of the very building where people could no longer afford to pay rent. These homeless communities were called 'Hoovervilles' because many thought that President Hoover was not doing enough to revive the economy and help those whose lives were devastated by The Great Depression.
To summarize: 1. The stock market and investors in it lost a great deal of money in 1929 and 1930 as investors predicted a period of economic contraction. 2. The Great Depression refers to a period a negative GNP growth, currency deflation, declining real estate prices, and very high unemployment that persisted from roughly 1930 to 1939. 3. The social impact was increased homelessness, starvation, desperation, and even a questioning of capitalism itself.
The economic depression (as opposed to psychological depression) had its roots in too liberal spending without the capital to back it up. People borrowed money to furnish their homes and ended up paying over time. When business hit hard times, probably because people were behind on paying debts, the stock market plunged and the depression began. Workers were laid off;businesses closed. Debts mounted because of this. The terms of World War I punished Germany so severely that their economy failed setting off a domino effect. Unemployment reached record highs; banks failed because loans were not paid back. Banks make their money by loaning out other people's savings and investments. The run on the banks occurred when people went to withdraw their savings and not enough money was on hand for the bank to pay them. All of this must sound awfully familiar to people today in spite of what was learned from the Great Depression of the 1930's.
The Great Depression of 1929 was an economic depression that affected the entire world. It began in the United States with a stock market crash that occurred in October of 1929. This crash was called Black Tuesday. The Great Depression hit industry very hard and unemployment rates skyrocketed.
After the market crashed, people stopped purchasing items. Because they stopped purchasing things, there was not a supply and demand for goods. This led to a reduction in production and reduction in work force. Many people were out of work. In addition, there were many banks that failed.