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Most economists of the 1920s believed that the stock market was the chief indicator of the physical health of the US. In September 1929, stock prices began to fluctuate, but market analysts dismissed this as temporary. They did not realize that stock prices were totally out of proportion to actual profits. Sales of goods and the construction of factories were falling rapidly while stock values continued to climb. Still, very few were worried; they still accepted Adam Smith's "self - adjusting economy" as a dogma and believed the problems would correct themselves.
The "black Tuesday", October 29th, 1929, was the beginning of the Great Crash. Within the first few hours of the day, the stock market was open, prices collapsed and wiped out all the financial gains of the previous year. Since most Americans viewed the stock market as the most important indicator of the economy's health, the great crash shattered public confidence.
Between October 29 and November 13, the day when stock prices hit their lowest point, over $ 30 billion disappeared from the American economy. This amount was comparable to the total amount of money that the federal government had spent to fight the First World War.
So as not to alarm the public, president Hoover chose his words carefully when he discussed the state of the economy in 1929. American economists and politicians had referred to previous economic downturns as "panics", such as the "panic of 1873" and the "panic of 1893". Hoover, however, called this latest downturn a "depression" rather than a "panic", and the name stuck.
Of course, America was not alone in the Great Depression; it struck all the industrialized nations of the world, including Germany, Britain and France. Moreover,
Germany still had huge reparation payments to make to the allies in the aftermath of WWI. These reparation payments fuelled spiralling inflation in Germany and crippled that nation's economy. The Allies themselves had borrowed money from the United States for the war, were unable to pay it all back during the 1920s and were now, in the great depression, not only broken, but in dept.
There are many stereotypical images of the depression, images enforced by the mass media, which include bread lines, hoboes hopping freight trains, skyrocketing rates of suicide and mental illness, former businessmen selling pencils or apples on street corners, Oklahoma farmers escaping the dust bowl for migrant farm work in California, most vividly portrayed in John Steinbeck's novel The Grapes of Wrath (1939).
These stereotypes only depict the experience of a small number of the American people. The reality of long - term unemployment, the day - to - day despair, was much less dramatic, and thus more dismal. But though, two basic economic facts soured the lives of average Americans: Unemployment and the inability to sell goods and services.
The great depression hit farmers especially hard. Many had gone into debt to buy machinery and land, and now could not make their payments. Low crop prices wiped out potential profits. In addition to the usual challenges of agriculture, a great drought took place in 1931 and 1932 in the Midwest and the South and turned much of the trans - Mississippi West into a dust bowl. Nevertheless, if farmers couldn't make a profit selling their products, at least they could still eat, so most stayed put. In contrast to popular images of farmers leaving the land, the 1930s actually had the lowest rate of migration from farms to cities.
However, the crash was not the immediate cause of the Depression. It alone was not responsible for a decade of worldwide economic catastrophe. The Depression itself was responsible for a dramatic transformation in the structure of American politics, for a change in Americans' expectations about government, and for a shift in United states foreign policy during the 1930s.
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