Great Depression in the United States
The Great Depression began in August 1929, when the United States economy first went into an economic recession. Although the country spent two months with declining GDP, it was not until the Wall Street Crash in October 1929 that the effects of a declining economy were felt, and a major worldwide economic downturn ensued. The stock market crash marked the beginning of a decade of high unemployment, poverty, low profits, deflation, plunging farm incomes, and lost opportunities for economic growth as well as for personal advancement. Altogether, there was a general loss of confidence in the economic future.
Wall Street Crash of 1929
The 1929 crash brought the Roaring Twenties to a halt. As tentatively expressed by economic historian Charles P. Kindleberger, in 1929, there was no lender of last resort effectively present, which, if it had existed and been properly exercised, would have been key in shortening the business slowdown that normally follows financial crises. The crash instigated widespread and long-lasting consequences for the United States. Historians still debate whether or not the 1929 crash sparked the Great Depression or if it merely coincided with the bursting of a loose credit-inspired economic bubble. Only 16% of American households were invested in the stock market within the United States during the period leading up to this depression, suggesting that the crash carried somewhat less of a weight in causing it.
However, the psychological effects of the crash reverberated across the nation as businesses became aware of the difficulties in securing capital market investments for new projects and expansions. Business uncertainty naturally affects job security for employees, and as the American worker (the consumer) faced uncertainty with regards to income, naturally the propensity to consume declined. The decline in stock prices caused bankruptcies and severe macroeconomic difficulties, including contraction of credit, business closures, firing of workers, bank failures, decline of the money supply, and other economically depressing events.