Immediate Factor for the Great Depression (1929-1932)

The Great Depression was a severe economic crisis that lasted from 1929 to 1939. It was the longest, deepest, and most widespread depression of the 20th century. The immediate factor for the Great Depression was the collapse of the Wall Street Exchange.

Collapse of Wall Street Exchange

The stock market crash of 1929, also known as Black Tuesday, was a major factor that led to the Great Depression. On October 24, 1929, millions of shares were sold, and the stock market lost billions of dollars in just a few hours. The panic led to a massive sell-off, and by the end of the week, the stock market had lost more than 40% of its value.

Impact of the Stock Market Crash

The stock market crash had a ripple effect on the entire economy. Investors lost their savings, and businesses went bankrupt. The banking system was heavily exposed to the stock market, and many banks failed. The fear of bank failures led to a run on banks, and people rushed to withdraw their money. This further weakened the banking system and led to a credit crunch.

Other Factors Contributing to the Great Depression

While the collapse of the Wall Street Exchange was the immediate factor for the Great Depression, there were other factors that contributed to the severity and duration of the crisis:

- Financial Impact of World War I: World War I had a significant impact on the global economy. The war had led to massive government spending, and many countries had borrowed heavily to finance their war efforts. After the war ended, there was a sharp drop in demand for goods and services, which led to an economic downturn.
- Fall in US Exports: The US was a major exporter of goods and services, and the fall in exports had a significant impact on the economy. The Smoot-Hawley Tariff Act, which was passed in 1930, raised tariffs on imported goods. This led to retaliation from other countries and a decline in international trade.
- Collapse of Banks: The banking system was heavily exposed to the stock market, and many banks failed. The fear of bank failures led to a run on banks, and people rushed to withdraw their money. This further weakened the banking system and led to a credit crunch.

In conclusion, the immediate factor for the Great Depression was the collapse of the Wall Street Exchange. The stock market crash had a ripple effect on the entire economy, and it led to a credit crunch, bankruptcies, and a banking crisis. While there were other factors that contributed to the severity and duration of the crisis, the collapse of the stock market was the trigger that started the Great Depression.