The Great Depression was one of the most severe worldwide economic events that has happened in world history. The Great Depression is often quoted as the mother of all financial disasters. It’s used by many historians, as an example/warning of the consequences of mass consumerism,greed and debt.
The great depression of the early 20th century, can teach us a lot about what can happen in society and business.This article will be delving into to the many different aspects of the Great Depression. At the time I am writing this article, the world is in The Great Lockdown of 2020, due to COVID19,a highly contagious disease.
There have been lots of financial analysts and news organizations predicting another Great Depression.Nobody knows whats going to happen for sure, but history does tend to repeat itself again and again! Read THIS post to the end,if you want to improve your prospects for making money in a crisis.
So let’s start with the prelude to the Great Depression, “The Roaring Twenties”.
The Roaring Twenties
After watching movies or reading books like “The Great Gatsby” and “The Grapes of Wrath”, we can sometimes get a mixed view of the 20s and 30s. The Roaring Twenties (1920s) was a unique time in human history,and a lot happened in that decade.
The 1920s or the Roaring Twenties was a period in human history, that saw dramatic changes in politics,technology, society and business around the world.
If you take a look at 1920s America for example.This was the first time in its history, that more people lived in cities than in rural communities.
Lots of different ways of doing business, and living came into existence. This was due to the mass consumerism of american society.
The birth of consumer Credit, buy now and pay later, started to emerge in this time period.
Women won the right to vote in 1920,and this gave women more liberation.
The women of the twenties were able to live more adventurous lives.The emergence of the Flapper’s,pushed against the traditional boundaries for women.
The Vamps of the 20s, were women who had more taboo breaking behaviors. A lot of religious people called this a “moral disaster”.
The rise of the Klu Klux Klan in the southern states,caused racial tensions with Black communities.
African Americans decided to uproot their families in the south,and moved to the northern states. 6 million African Americans moved to the major cities of the north.This was called the “The Great Migration”,and it happened between 1910 and 1930.
America became more connected via the telegram services, and more places had electricity.Radio’s became the must have luxury,people would listen to music and sports.
The electrification of the USA fueled the production of appliances,and new entertainment services, and equipment businesses could use for manufacturing.
Products and services were also marketed via the mass media of radio.People were also encouraged to buy luxury high ticket items on credit,like Radio’s and labor saving devices.
This increased the personal debt people had,by living for today without any thought of tomorrow.
The traditional values and social etiquette changed massively in the 1920s. The older generation came into constant conflict with young people.
Many views on Sex, religion and politics were changing in the 1920s. Some young people who lived in major cities like New York,had a thrilling time in the 1920s.
The roaring twenties started with a brand new craze called Jazz.
When Black Americans moved north,they brought Blues and Jazz music with them.White Americans fell in love with Jazz music,starting a fantastic mix of cultures never seen before in the USA.
Jazz played a major part of the social scene in the 20’s. Cities like Chicago and New York had Jazz many bands. playing at the most famous of venues.Establishments like the Savoy in New York and the Aragon in Chicago,had become famous for Jazz.
Many of the new founded radio stations played lots of jazz, and jazz phonograph records started to be recorded.
In 1927 100 million jazz phonograph records was sold.The mass production of recorded music sent Jazz into the mainstream.
The older generation found jazz to be vulgar, and blamed Jazz for the moral outrages in society.
Just like Rock n’ roll in the 1950s/60s,Jazz was a major part of youth culture in the 1920s. The novel ‘ The Great Gatsby’ by F.Scott Fitzgerald captures the height of the jazz era.
The roaring 20s jazz music inspired many dance styles like ‘The Charleston’,’The Cakewalk’,’The black bottom’ and ‘The Flea hop’. Jazz music was played at speakeasy bars around major cities like New York.
speakeasy and prohibition
The 1920s also saw the prohibition of alcohol, and the rise of the speakeasy. Speak easy’s were hidden bars,ran by entrepreneurial people.The illegal alcohol was supplied by business people like Al Capone.A lot of gangs got in on the action and bootleggers would always be one step ahead of the authorities.
The line between gangster and business people became blurred in this era,many people like Al Capone had massive fame, and political connections.This outraged authorities,and on 27th March 1929,Al Capone was arrested by the FBI.
Many customers at speak easy’s would be from all walks of life,even people in positions of power.The conflict of interest and double lives of these so called respectable people, caused a lot of corruption and double standards.
1920s Car culture
Car’s became more popular with young people, and the term ” brothels on Wheels” was coined.
Henry Ford famously said “People can have any color they want,as long as it’s black”,referring to his Ford Model T.
Young people found it a lot easier to consummate their relationship’s in the new automobile culture.
In 1924 you could buy a Model T Ford for around $260-$300, this luxury was made affordable by using consumer credit.
The roaring twenties was a time of wealth and huge excess, even regular working class people could get in on the action.Everyone from the shoe shine boy to the store clerk, started to buy into the stock markets on Wall street.
People were actively encouraged to invest in the stock market during the roaring twenties. This was done through mass marketing formats like newspapers,radio and magazines.
The brokerage firms in the USA, offered something called margin trading.
The brokerage firms on Wall Street would lend money to people,who wanted to get rich quick. Margin trading is also known as using leverage. So for example; you could buy $100,000 of stock with $10,000 of money.This would be a leverage of 10X.
When people in the 1920’s bought stocks on margin, they could put a small amounts down and make big profits.Fueling record high speculation,further pumping up stock market prices.
The bull market in the roaring Twenties got people really excited. People would invest their life savings in the Wall Street stock exchanges.
The stock market kept on going up in price,people said it was a licence to print money. More and more people from all walks of Life, had money in the stock market.The bull run of the 1920s would soon take a devastating turn.
Meanwhile as the stock market pumped,nearly 80% of luxury goods are being bought on credit.Most Americans had no savings at all!People would live paycheck to paycheck and put all their extra money in stocks.
It was becoming very clear that people had spread themselves too thin. This was because people were buying high ticket items using credit.This was combined with people speculating on the financial markets.
Then the first signs of disaster started to emerge on wallstreet.
When Was The Great Depression
When was the Great Depression? It is generally accepted that the year of 1929 was the start of the great depression.This was caused by a series of stock market crashes that had a knock on effect, with the wider economy suffering as a result.
What Caused The Stock Market Crash Of 1929
The Great depression timeline starts in March 1929!
On March 25th 1929 a small crash occurred in the New York Stock Exchange. This was after the Federal Reserve warned about excessive speculation on the stock market.
The fear uncertainty and doubt, started the rapid selling of stocks by investors. The market fell by 10%, and the panic started to intensify. Charles E Mitchell of National City Bank,managed to secure 25 million dollars in credit stop the crash.It worked as a temporary measure,but things would start to get much worse.
When September 1929 arrived, the Dow Jones had already tripled in value since 1924.Then on September 20th 1929 the London Stock Exchange has crashes.This is after a top investor called Clarence Hatry and some associates, are jailed for fraud and forgery charges.
American investors took notice of the LSE crash, and the US stock markets started to become even more unstable.The volatility of the markets started make people become more concerned about investing overseas.
Then on October 24th 1929,after months of volatile stock selling and buying volumes, “Black Thursday” happened.This was when 11% of the value of the NYSE was lost on the opening bell,causing even more panic selling.
What’s known as the “Wallstreet Crash” also known as “Black Tuesday”,was on 29th October 1929.Although the reality of the crash, was played out in the year of 1929.
Whe everything transpired,banks all over the USA shut down.There ended up being $140 Billion in savings lost forever.Back in those days,there was no bank deposit insurance.There was a run on the banks,but no money was left to pay customers.Most victims of the bank failures were regular people with no other assets.
The stock market continued to crash and eventually hit the bottom, on the 23rd November 1929 and ended up traded sideways.When a market trades sideways,there is no price action.
So now we have covered the cause of The Great Depression,let’s continue...
What Ended The Great Depression
The Republican President Herbert Hoover was criticized a lot during the early 1930s with regards to the depression.It became a central issue of his presidency,he won the election in 1929 as the crash was just happening.President Hoover was an advocate of Laissez-faire Capitalism.The meant that he believed the markets and economy, would self correct themselves.
President Hoover lost the election of 1933 to Flanklin D. Roosevelt.FDR (as he was known) was a democrat with big ambitions and made lots of new changes to federal legislation.The changes he made helped people and businesses struggling in the great depression.His legislation was famously called the New Deal.
World War 2
President D.Roosevelt’s policies helped business,he also helped the agriculture sectors who were suffering from the worst drought in history.The dust bowl drought decimated crops in the mid Atlantic states.FDR’s policies also helped the unemployed.
The USA didn’t enter WW2 until 1941,but America was certainly a key player in the production of supplies for the war in Europe.The USA sent military supplies the UK and France in 1939,to help the defend against the Axis of evil.
The great depression ended with the outbreak of World War 2,some people say it still carried on into the 1950’s.
The combination of government spending on weapons and manufacturing industry helped the economy. After most industries were being repurposed for the war effort. The reduction in unemployment also helped the economy.
After the bombing at Pearl Harbor by the Japanese in 1941,the USA was officially fully mobilized for war.
FDR worked with the leaders of the other nations like the UK,Canada,Australia and Soviets (Russians), to bring down the Nazi and axis forces around the world.
Many young people lied about their age to go and fight in WW2. My grand father Jack Adams was only 15 years old, when he served in the Royal Navy on HMS Violet, his rank was Able Seaman.
We have the brave people of the allied forces to thank for our freedom, for saving us from the tyranny of the Nazis’s.
Great Depression Timeline
Below is the great depression timeline,and contains some of the key events.
- 1929 – USA and UK stock market crashes. Herbert Hoover is elected president of the USA.
- Then 650+ banks failed and the money supply dwindled,meaning there was no credit available.
- The dust bowl drought starts,farmers cant grow food in the mid Atlantic states of the USA.
- 1930 The Smoot-Hawley Act is signed by Hoover,with 900 import tariffs. This raised taxes 40-48% on foreign imports.
- The raising of taxes triggered a trade war with many countries around the world,who also raised their import taxes in retaliation.
- Global trade was forced down by 65%.
- 1931 – Civil unrest started,with food riots happening in Minneapolis USA
- Unemployment rises 15.9%
- 1932 – Top rate income tax in the USA rises to 65%
- Congress approves lending of $2 Billion to financial institutions, to prevent further failures.
- Dow bottoms at 41.22.This is a 90% drop from the 1929 pre-crash high.
- 1933 – Prohibition ends and alcohol is taxed,helping raise government revenue.
- President Roosevelt launches his NEW DEAL policies.
- The Gold Standard for the US Dollar is scrapped.
- Unemployment rises to 24.9%,this is a record breaking high for the USA.
- 1934 – The Gold Reserve Act made it illegal to privately own Gold
- The economy grew by 10%
- Unemployment dropped fell to 21.7%
- Debt rose to $27 Billion
- 1935 – The Social Security Act provides help for elderly,disabled and children from low income families.
- 1936 – FDR raises top rate income tax to 79%
- Economy grew to 12.9%
- Unemployment goes down to 16.9%
- Debt grows to $34 Billion
- 1937 – Franklin D. Roosevelt is re-elected
- The president cuts spending, this sends the US economy back into depression
- The Minimum Wage is introduced,to try and help people on the lowest incomes.
- 1938 – The threat of war is looming in Europe
- 1939 – Hitler invades Poland starting World War 2
- FDR Repeals the US Military arms embargo on France and the UK
- 1940 – The war in Europe intensifies with London being bombed by German Luftwaffe.
- France falls to the Nazis and they march on Paris
- The US economy grows 8.8%
- Unemployment to 14.6%
- Debt rises to $51 Billion
- 1941 – The USA sends war supplies to the UK,to help fight the Nazi’s
- Germany sinks the US Navy Destroyer “USS Reuben James”
- The attack on Pearl Harbor by Japan happens.
- USA declares war on Japan
- The US officially enters World War 2
There are lots of fine details about the great depression timeline,but I wanted to keep this post as short as possible.The subject of the great depression has so much info, I could write a book on it.
Good Things That Came Out Of The Great Depression
There was a lot of bad things happened in The Great Depression,like poverty,unemployment and starvation.Some people lost everything,with suicides skyrocketing.People lost money when stock markets crashed and banks failed.
Some good things did happened on the flip side,like welfare reforms for vulnerable groups in society.
surprisingly a lot of millionaires were made in the great depression,people under difficult times had their entrepreneurial spirit ignited, when trying to solve the problems the encountered. Many entrepreneurs worked their way out of poverty by inventing,creating and serving people.Lessons have been learned about the excess of consumer spending with unregulated credit.
Prohibition of alcohol was abolished in 1933,helping to raise taxes for the US government.The black market in alcohol was finished, and the police could concentrate on serious crimes.
The old ways of doing things had to change and people became wiser.Many people of that generation stopped trusting banks.People started using due diligence, when doing business/investing in markets.
Will there be Another Great Depression ?
Like I said at the beginning of this article,there are plenty of top people in finance,business and economics, who think the 2020 lockdown might be the start a global depression.You can’t stop an economy without there being serious consequences.
Top investor Warren Buffet has sold all of his shares in US airlines.People pay close attention to what he does,his company Berkshire Hathaway, are a major player in the buying and selling of large amount of stocks.
The current situation with Lockdown and COVID 19 has killed local businesses like retail,food,entertainment,travel and a myriad of industries.
The key to the future of wealth creation is online business and entrepreneurship.This can help people thrive in another great depression.
The internet helps people to educate themselves and run businesses from the safety of their homes.
I think that we could be in the perfect storm with recent events in 2020. We could see “The Great Depression 2.0” with a shift in the social and work life norms.There are lots of similarities to the roaring twenties and the dark days of the 30’s.History seems to repeat itself over and over.
We have never had it so good at the beginning of the 21st century. This has been driven by a consumer culture,that buys shiny things on credit cards.The personal debts are astounding,just like the prelude to 1929. The stock market could have a massive crash,as nobody is spending money in the economy.
Commercial and private landlords will also be taking a hit.The housing market on rentals is on Lockdown. The buying and selling of houses is impossible,the banks have stopped lending mortgages (Credit).House sales are falling through,people may also lose their homes when they default on repayments.
It’s looking very bleak for the property markets and house prices will probably crash,leaving people with negative equity.
There is some light still shining in the online business world.The entrepreneurs of modern times have created online businesses models,that are really profitable.Entrepreneurs can work anywhere in the world with a laptop,smartphone and a internet connection.
If you want to learn how to start a profitable online business from home, click the link below!
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