Overproduction And Its Weakness
There were many problems that occurred as soon as WWI ended. Such
as
overproduction.
Overproduction was going on all through the war,
and it did not stop as soon as
the war came to an end. The reason
overproduction came into effect in the first place,
was because america had
to feed the soldiers and the allies, therefore, the goverment
constantly
pushed farmers to grow more crops.
When the war was over, instead of
decreasing the crop amount, farmers grew the
same number of crops. Not as
many people were in America, therefore, less people
bought less amounts of
food. In order for people to buy more food, the goverment
believed that if
the prices plummeted, the sales would increase, unfortunately, it did
not
happen that way.
Overproduction not only hurt the farmers, but it
also hurt the rest of the economy.
Since the food was not selling well,
the stores began to order less food from the farmers.
Since the farmers
were not making quite as much money, they had to do either of the
three
following things: A) Lay off workers
B) Reduce their
pay
C) Cut down on maintenance of machinery.
If any of those
possibilities were done, then the workers would not have extra
spending
money. Therefore, they would not be able to go to the store and buy
as much food as
necessary, therefore, the gradual domino effect
continued.
Overproduction not only hurt the manufaturers but it also
greatly hurt the citizens
that lived in the USA. Overproduction was also one
of the leading "sparke" that set of the
Great
Depression.
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Essay
#2
The Stock Market Crash of 1929
In the 1920’s many
people relied on the stock market. Many people wanted to get
rich fast,
others just wanted to get some extra cash. It was believed that the easiest way
to
do so was to invest in the stock market.
The stock market works in
the following way: A person believes that a certain
company is doing very
well, therefore, that person goes out and buys himself a share (a
portion) of
the company. In order for the person to own a share, he must have
enough
money to buy it. Unless, this person decides to buy on margin, which
means loaning
money from the bank, when you earn the money back, you promise
to repay the bank.
After the investor buys his portion, he begins to see
that it is going up in cost. Right then
he knows that he must go sell it for
a price higher than he bought it for.
This process was thought to be a
"get rich scheme." Many people invested in the
stocks and prospered greatly
Others lost everything that they had due to the stock
market..
Some of
the people that bought these stocks were taking a big risk. They
usually
bought the stock for a very short term. They would buy and sell the
stock(s) very quickly
hoping to make millions of dollars. Therefore, without
thinking about it, they would buy
the stocks on margin, assuming that they
would get loads of, money and be able to pay the
banks back in full.
Unfortunately, thus was not always true. If the week the investor
bought a
share and it plummeted, the owner or investor would lose all the money
he
invested in this small share. He would not be able to repay the bank, this
put the investor
in debt.
Before 1929, all was well. People put money
into the market, and most of the
time they prospered. Since the market was
doing so exceptionally well, it was named the
"Bull
Market."
People did not think that others would stop buying shares,
therefore, many
invested their life-savings. Unfortunately, in the summer of
1929, all turned against the
investors. People began to get more cautious
with their money. They saw that the prices
of shares were dropping, so they
did not feel the need to buy anymore stock. Others just
lost most of their
money in this small gamble. Those who lost the money were usually
also in
debt with the bank. The bank was losing its money thanks to the speculators,
the"get rich quick people."
People began to sense the great dangers of
the banks losing its money, they sensed
that if the bank lost enough money
they would go out of business
On Black Tuesday, the stock market crashed
due to the loss of its investors.
People rushed to the banks to get
whatever was left of their money, but it was to late
because the banks were
already shut down, for good.
People were left homeless, jobless and poor.
In order for them to get back on their
feet they began to look for jobs. Many
qualified people were searching for jobs,
unfortunately, only a few were able
to get a job to get them stable. The people that did
not have jobs were left
poor. There were so many of these people, that in 1929, the Great
Depression
began!