A fall in nominal interest rates and a rise in deflation adjusted interest rates.

There were several causes for the depression in America that started in 1929. One of these causes was the Wall Street Crash. This was when the stock market was booming and over 10 million shares were sold as the prices of shares decreased and the continued to fall as sellers tried to find people to buy shares. On 29th October over 16 million shares were sold as investors tried to sell shares for any price that they could get before the prices fell even lower. The stock market lost 47% of its value in 26 days. over 100,000 American companies were forced to close so, consequently, many workers lost their jobs. Unemployment rose 25% which meant that there was less spending to help the economic situation. As businesses began failing, the government created the Hawley-Smoot Tariff in 1930 to help protect American companies. This charged a high tax for imports thereby leading to less trade between America and foreign countries. This made America lose out on even more money to help the economy rise. People bought shares on credit expecting to sell them for a profit and settle their debts. This is 'speculation'. But during 1928, share prices did not rise as much in the previous years and many companies were not selling as much goods, so profits fell so less people were willing to buy shares. Also, overproduction was a cause too. This was when there was too many goods being produced in large amounts so, when all of the Americans had bought everything that they wanted, there was a reduced demand for them. Even though many Americans did not want to buy anymore consumer goods, there were still many who could not afford to do so anyway. In 1928, thousands of American families were living on a small amount of money a year so even during the boom years, many Americans still lived 'below the poverty line'. The worst off were farmers, black workers and new immigrants. As well as this, many people were worried about all of the banks collapsing, so they decided to take out money in large sums before they lost all of their money. Eventually, thousands of banks were forced to shutdown as they had to money to keep them running. The Great Depression: Causes 1. Share speculation: During the boom of the 20s, there was a tremendous increase in share trading. The number of people owning shares rose from 4 million in 1920 to 20 million by 1929. Many of these owners were speculators who only made a down payment on the shares, hoping to pay for the rest when they had sold them for profit. 2. Over-production. 3. Unequal distribution of the wealth: almost 50% of the American people were pure. 4 Loans: brokers provided many loans to enable investors to buy shares. When the stock market crashed investors could not pay back the loans. 6. Tariffs and Protectionism: European countries could not afford US goods, and many of them were protecting their own goods by putting high tariffs on American imports. US companies had no-one to sell their products to and started to lose money. : Consequences and Effects: The Great Depression had devastating effects in virtually every country, rich and poor. Personal income, tax revenue, profits and prices dropped while international trade plunged by to . Unemployment in the U.S. rose to ....%, and in some countries rose as high as .... %. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60%. Effects in the US: 1. In 1929 the USA stopped lending money abroad and stopped its ... loans, 2. Almost 32 000 U.S. businesses went bankrupt in 1932 alone, 3. From late 1919 to mid 1932 5000 banks went bankrupt losing 3.2 billion US dollars of deposits, 4. of the workforce about 13 million were unemployed by 1933, 5. Farm products prices fell 60 %. 6. Other effects: undernourishment, homeless people, migration to seek work, ...