When did the Great Depression begin?

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The Great Depression began right after the stock market crash on October 29, 1929. It lasted for about ten years from 1929 to 1939, which takes us to the beginning of World War II. So, why did the Great Depression happen?

Generally, the stock market crash was a big factor, although it wasn't the only one. During the era of the roaring twenties, many people bought stocks in order to make money. Others bought stocks on the margin, meaning that very little was put down (about 10%-20%) for the costs; the remainder (80-90%) was borrowed. Investors gambled on the fact that, once stock prices rose, they could sell the stocks, pay off their debts, and reap a nice profit from the sale. So, many investors borrowed substantial amounts of money in order to reap potential profits.

On the surface, the stock market was performing admirably in the roaring twenties. However, the truth was that the stock market was being fueled by speculation and consumer expectation rather than market fundamentals (meaning that public consumption of products was not keeping up with production). When shares began dropping in value on October 24th (Black Thursday), people began to get worried. They commenced selling their shares, hoping to cash in on any profits they could make. Eventually, others began to sell their shares as well. This began an avalanche of selling that eventually caused the stock market to crash.

So many stocks lost their value that companies were forced to lay off their employees. Almost 15 million people became unemployed during the height of the Great Depression. Many unemployed families also lost their homes, which caused a domino effect: as families defaulted on their mortgages, banks began to fail. Since deposits were uninsured at the time, this means that many people lost the money in their checking accounts. So, the less money people had, the less they could buy. It was a vicious cycle, and the United States didn't see any relief until President Roosevelt instituted some fiscal and social changes in the country and the second of the world wars began.

For more on the Great Depression, please refer to the links below.

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