Causes and Solutions to the Great Depression

Causes and Solutions to the Great Depression

Causes and Solutions of the Great Depression

There were many factors that led to the Great Depression; however, the greatest may have been the lack of regulation of the US economy. But with Roosevelt’s “Alphabet Soup” laws and regulations, as well as WWII –which provided a much needed boost to employment and the GNP– the US was able to pull itself out of its economic spiral.

In the 1920s, the economy was not regulated, which led to things like companies not releasing important information to their shareholders. This withholding of information led to Black Tuesday, where Americans lost more than 3 billion dollars in the Stock Market Crash. When people started to sell stock in companies, other people might take this as a sign of the company’s decline, and the stock would go into a downward spiral. To make matters worse, when people began to panic and draw out their money from the banks, many banks ran out of money and had to close, thus disrupting the ‘trust’ factor that the US economy relies on. While the economy continued to struggle, Roosevelt was working to raise it to the level it once was.

While Hoover had been a believer in the ‘Trickle Down’ theory –which stated that by subsidizing large businesses, the money would eventually work its way down the “economic ladder”– Roosevelt firmly believed that economic reform was the only way to stabilize the economy. He passed a series of laws, known as the “Alphabet Soup” laws, to try and revitalize the economy. These included making organizations like the FDIC, which insured deposits to the bank up to $5,000, and starting welfare programs like Social Security and Unemployment. These reinvigorated people’s faith in the banks, and also in the entire economy. No longer would they run the risk of the banks running out of money, as happened after the stock market crash. Companies were required to publicize their status, so that the public would know if they were at risk of losing their money if the company...

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