Great Depression

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The Great Depression is the period of history that followed "Black Thursday", the stock market crash of Thursday, October 24, 1929. The events in the United States triggered a world-wide depression, which led to deflation and a great increase in unemployment.

In the United States, Herbert Hoover was president, and he tried to do something about the situation without much luck. One of the major problems was that with deflation, the currency that you kept in your pocket could buy more goods as the prices went down. The other was that there had been no oversight in the stock market or other investments, and with the collapse, many of the stock and investment schemes were found to be either insolvent, or outright frauds. Unfortunately, many banks had invested in these schemes, and this precipitated a collapse of the banking system in 1932. With the banking system in shambles, and people holding on to whatever currency that they had, there was minimal cash available for any activities that would cause positive change.

In Germany and some other countries, the governments printed more money to avoid this situation, but it actually made the situation worse, as the currency was then being spent on scarce goods, and prices increased exponentially, creating a situation now called hyperinflation. Promising to fix the situation, Adolf Hitler took over the government there. The situation was similar in Italy, where Musolini took charge.

In 1933 the United States elected Franklin Delano Roosevelt to replace Hoover as president. With unemployment near twenty five percent of the workforce, he initiated a number of government programs to increase liquidity and provide jobs, which jointly are called the New Deal. Some believe that these actions helped bring the country out of the depression--though there is considerable controversy over the extent to which this is true--and provided some of the infrastructure, including roads that are still in use today.

The great depression was an extended economic contraction that affected the entire world, and in some places it continued until government induced World War II spending restarted economic expansion.