In the views of economist, perfect market is such a market which does not experience any
kind of crashes, bubbles or recessions, but when human beings are the players, it is inevitable
that these phenomena do not occur. The Great Depression is one of the live examples that how
susceptible markets and economies can be, as the world economy experienced one of the worst
economic blow. The beginning of the Great Depression was due to the stock market crash of
1929. The market crash of 1929 swept away investments of many people and it has shaken the
world economy. Further, the failure of many banks added to the injury as savings of many people
was wiped out even if they did not invest in the stock market. According to many researchers and
scholars, the downfall of the market is not in the hands of people and it is difficult for human
beings to avoid it, but with stiffer and better banking regulations, failures of banks could be
avoidable (Jukes, 2008).
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Table of Contents
INTRODUCTION .......................................................................................................................... 2
THE GREAT DEPRESSION ......................................................................................................... 3
CONCLUSION ............................................................................................................................... 4
List of Figures
Figure 1: Chart showing the crash ................................................. Error! Bookmark not defined.
Figure 2: Chart showing weekly crash........................................... Error! Bookmark not defined.
Figure 3: Monthly chart showing eventual market low in 1932 .... Error! Bookmark not defined.
INTRODUCTION
In the views of economist, perfect market is such a market which does not experience any kind of crashes, bubbles or recessions, but when human beings are the players, it is inevitable that these phenomena do not occur. The Great Depression is one of the live examples that how susceptible markets and economies can be, as the world economy experienced one of the worst economic blow. The beginning of the Great Depression was due to the stock market crash of 1929. The market crash of 1929 swept away investments of many people and it has shaken the world economy. Further, the failure of many banks added to the injury as savings of many people was wiped out even if they did not invest in the stock market. According to many researchers and scholars, the downfall of the market is not in the hands of people and it is difficult for human beings to avoid it, but with stiffer and better banking regulations, failures of banks could be avoidable (Jukes, 2008).
This paper will discuss about the stock market collapse of 1929 and other factors that contributed in the devastation of the world economy and which gave rise to The Great Depression.
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THE GREAT DEPRESSION
Depression can be defined as a long and severe period of downturn activities or when all the activity results in the downfall of an entity. In the terms of economy, economic depression can be defined as a period of recession when the businesses are not doing well. Generally this recession lasts for two or more years. Economic depression is characterized by a lot of unemployment, most of the businesses operating with diminishing output; reduce commerce and trade, sovereign debt defaults and bankruptcies, less of no availability of credit and volatility in the value of currency (Wheelock, n.d). Further, during the time of depression, as the confidence of the consumers fall down and because of which they do not reduce their investment activities, thus, resulting in shutdown of the economy. There are different views of different economist regarding the duration of the depression. According to some economists, depression covers only that period in which the economic activities are infected. On the other hand, some economists believe that the period of economic depression does not end up till the recovery of all the economic activities to its normal pace (Yadav and Shankar, 2009).
In line with the above definition, the economic recession experienced by the United States and the whole world after the collapse of U.S. stock market on October, 29, 1929 is considered to be as The Great Depression. The origin of the Great Depression was the United States, but within no time it entered in the Europe and then across the rest of the world. The period of the Great Depression lasted for around 10 years and resulted in unemployment, hunger, poverty and political unrest. In October, the 24th, 1929 the New York Stock Exchange (NYSE) was crushed. This day is regarded as the Black Tuesday in the history of the stock market in the entire world (Johnson, 2011). Because of this Great Depression, the majority of the people left with nothing as most of the savings made by them was invested in the stock market and nearly the entire amount invested by them in the stock market was lost away. This trend continued and on the next Tuesday most of the economist sensed the beginning of the Great Depression as the DJIA dropped by 12%. It also resulted in decline in international trade, product prices, tax revenue and personal income. According to some economists, if proper checks are not done even on capitalist economy, it can prove dangerous as it could be one of the reasons behind the Great Depression. Because of such views of some economists, some of the countries completely
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revamped their political structure and adopted either fascism of socialism. The best example is of Germany which adopted fascism structure after the Great Depression (Reid, 2011).
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CONCLUSION
After working on the above paper, it can be concluded that the crash of the stock market, that is, Dow Jones in the year 1929 was the major reason behind the Great Depression. Because of the crash in the stock market, many people lost their lifetime savings and even it gave rise to unemployment and poverty. Most the companies and banks were also not able to sustain in such economic downfall situation and had to close their operations. Apart from the stock market
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crash, other factors which contributed to the Great Depression are improper banking system, decrease in money, unequal distribution of corporate power and wealth, etc This is Sample Essay,
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