From the 1929 stock market crash until 1939, the Great Recession was the most severe economic crisis to ever impact the industrialized world.
It started after the 1929 stock market catastrophe, which paralyzed Wall Street and caused the loss of millions of investors. Public spending and investment fell during the following years, which led to sharp drops in industrial production and employment as faltering businesses laid off workers. When the Economic Crisis peaked in 1933, there were 15 million unemployed Americans and roughly half the nation's banks had failed.
What Caused the Great Depression?
The United States' economy grew quickly throughout the 1920s, and from 1920 and 1929—a time period known as "the Roaring Twenties"—the country's overall wealth more than doubled.
Everyone from billionaire businessmen to cooks and janitors invested their funds in stocks on the stock market, which was concentrated at the NY Stock Exchange on Wall Street in New York City. As a response, the stock market expanded quickly and peaked in August 1929.
At that point, unemployment had increased and production had already decreased, driving up stock values well over their true value. Additionally, the farming part of the economy was hurting owing to the drought and declining food prices, low wages, the proliferation of consumer debt, and banks' surplus of huge loans that couldn't be repaid.
In the summer of 1929, when consumer spending dropped and unsold products started to accumulate, manufacturing output also slowed, the American economy experienced a slight recession. However, stock prices kept rising, reaching astronomical heights by the fall of the same year that were incomprehensible in light of projected future earnings.
On Oct 24, 1929, the stock market catastrophe that some had anticipated finally materialized as anxious investors started selling overvalued shares in large quantities. On "Black Thursday," a massive 12.9 million shares being exchanged.
Approximately five days later, on Oct 29, often known as "Black Tuesday," 16 million stocks were traded when Wall Street was hit by yet another panic attack. Millions of shares became worthless, fully wiping out the investors who had purchased equities "on margin" (with borrowed funds).
Following the stock market crisis, consumer confidence plummeted, which resulted in a decrease in spending and investment, which caused factories and other firms to slacken production and start laying off employees. For those who had been fortunate enough to keep their jobs, incomes dropped and their purchasing power shrunk.
When obliged to purchase items on credit, many Americans accrued debt, and the amount of foreclosures and repossessed properties increased significantly. The universal adoption of the gold standard, which brought nations from all over the world together to trade fixed currencies, contributed to the spread of economic problems from the U.s throughout the world, particularly in Europe.