1. The reduction in purchasing across the boardWhen the stock market crashed the fears of further economic distress had people from all classes stopped purchasing items. Which then led to a reduction in the number of items produced and to a reduction in the workforce.
As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. The unemployment rate rose above 25%, which meant, of course, even less spending to help alleviate the economic situation. 2. American Economic Policy with EuropeAs businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies.
This charged a high tax for imports thereby leading to less trade between America and foreign countries along with some economic retaliation. 3. Drought ConditionsWhile not a direct cause of the Great Depression, the drought that occurred in the Mississippi Valley in 1930 was so bad that many could not even pay their taxes or other debts and had to sell their farms for no profit to themselves.
To me this did contribute to it. In the last decade we saw two economic catastrophes one being The Market Crash of 2008, which was signified by a 700 point drop in the Dow on September 29, 2008. This was the largest point drop in the history of the New York Stock Exchange. What triggered this crash was the fact that on that day the bailout bill failed in the Senate and panic over the fact that Lehman Brothers went bankrupt.The second one was The Great Recession of 2008-2009, this affected millions of Americans. Some say this was the “Perfect Storm” that had been brewing for years and it finally reached it breaking point.
Market instability was one factor because of the dramatic change in the ability to create new lines of credit. Greed, basically people got credit loans that went unchecked in our country, and it got out of control. Leading to thousands of people taking loans larger than they could afford. The Housing Market Declined, this set off a chain reaction in our economy people could no longer flip their homes for a quick profit leaving investors and the banks holding the bag. The Credit Well Dried up, causing a lot of banks to tighten their lending requirements, but for some it was already too late, and the damage had been done. The Economic Bailout is Designed to Increase the flow of Credit, the idea behind the economic bailout was to buy these risky mortgages backed securities from financial institutions, giving these banks the opportunity to lend more money to individuals and businesses, hopefully spurring on the economy. The Cost of the Great Recession for many people they saw the loss largely through falling home values.
Even today you can still feel the effect of the recession.