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A Great Depression Timeline -
Chronology and Causes

July 7, 2014 | by Steve McCurdy

Non-Farm Depression UnemploymentThe Great Depression lasted from 1929 through the early 1940s. Virtually all Western economies were affected, and most, including the United States, were ravaged. Financial markets are highly complex systems, and today, 85 years later, there is still lively debate and little consensus among economists regarding the causes of the Great Depression. Hundreds of books have been written about this period of American History, and we will not presume to do justice to the subject in a short article here. Instead, we will provide a chronological timeline of the major events that impacted the country in the 1930s and we will summarize what are generally regarded as the primary causes of this economic tragedy.

 

Chronological Timeline

 
The Preceding Decade – 1920 through 1929
 
The United States had two Republican Presidents during this period; Warren G. Harding from 1920 through 1923 and Calvin Coolidge from 1923 through 1928. They shared a common Treasury Secretary, Andrew Mellon – 1920 through 1932, and all three believed in small government, low taxes, and laissez faire economic policies. This decade is popularly known as the “Roaring Twenties,” and it was marked by unprecedented industrial growth, social and artistic dynamism, and uninterrupted economic prosperity.
 
October 29, 1929 – Black Tuesday
 
The stock market crash abruptly ended the party. On October 28 and 29 Wall Street stocks, most of which had been purchased with margin loans, lost 25% of their value. Panicked banks reacted by calling most of their margin loans, which shocked borrowers who no longer had the ability to repay.

November, 1930
 
In the 10 months following Black Tuesday 744 banks failed, and non-farm unemployment almost tripled, from 5% to almost 15%.
 
December, 1931
 
The Bank of the United States in New York City collapsed, representing the largest bank failure in US history. Earlier in the year food riots had broken out in Minneapolis and in California 6,000 Mexican Americans were deported for “stealing jobs from Americans.” Non-farm unemployment had surged to 25% by year end, and 1,000 more banks had failed.
 
November, 1932
 
Franklin Delano Roosevelt was elected President in a landslide victory over Herbert Hoover. New York City Apple SellerAlmost a million workers in New York City were dependent upon city relief, and more than 6,000 unemployed people were selling apples on street corners for 5 cents each. In Dearborn, Michigan 3,000 idled Ford Motor Company workers marched on the plant, and were turned back by Detroit police and Ford security. Four were killed, and hundreds were injured. Non-farm unemployment had increased to 37%.
 
March, 1933
 
FDR, using “a National Emergency” as his rationale, took the country off the Gold Standard and issued Executive Order 6102, confiscating all privately owned gold and silver bullion from American citizens. Ft. Knox was built to house the redeemed metals.
 
March to December – 1933
 
FDR used a fireside chat to tell Americans they “had nothing to fear but fear itself.” Congress passed the Glass Stegall Banking Act and created the FDIC. Showing its ineptitude, the Department of Agriculture slaughtered 6 million pigs “to stabilize pork prices.” With millions of Americans starving, most of the meat went to waste. Four thousand more banks failed in 1933, and non-farm unemployment peaked at 37%. By the end of 1933, depositors had lost $140 billion due to bank failures.
 
May, 1934
 
Dust Storm - 1934A three day dust storm blew an estimated 350 million tons of fertile topsoil off of Great Plains farmland, depositing it as far East as Boston and New York City. This event temporarily destroyed any hopes for an economic recovery, and provided the background material for “The Grapes of Wrath,” which John Steinbeck would publish in 1939.
 
1935
 
Congress passed the National Social Security Act. The Supreme Court declared 11 of 16 of FDR’s “Alphabet Programs” unconstitutional, including the NRA (National Reconstruction Act), and the AAA (Agricultural Adjustment Act). The Court ruled that these programs infringed upon States Rights. Roosevelt supporters have since argued that these rulings stopped recovery and lengthened the Depression.
 
1937
 
Roosevelt introduced the “Judicial Procedures Reform Bill” more popularly referred to as the “Supreme Court Packing Bill,” to increase the number of Supreme Court justices from nine to fifteen. It was defeated in Congress.  By the end of 1937 9,000 banks had failed, but non-farm unemployment was down to 22%.
 
1939
 
Hitler invaded Poland, beginning  World War II, which would eventually end the Great Depression.

Please visit our Image Gallery to see some poignant photos of despair and hopelessness durning the Great Depression.

Primary Causes of the Great Depression

 
The common belief that the 1929 stock market crash caused the Great Depression is a gross oversimplification at best. The most widely accepted theory today is that advanced by the “Monetarists,” as set forth by Milton Friedman and Anna Schwartz in their classic book “A Monetary History of the United States.”
 
Depression Era Money SupplyThe Monetarists argue that the principal cause of the Great Depression was the great contraction in the money supply that occurred between 1929 and 1933, which was brought about by four waves of bank failures and the failure of the Federal Reserve to react properly. Bank reserve requirements were much more stringent then, and the Federal Reserve operated in accordance with the “Real Bills Doctrine,” which in effect said the only permissible loans were short-term (60 days or less) and were secured by “true bills” (e.g. good collateral). Thousands of margin loans and business loans were defaulted upon, in effect taking money out of the banking system, and additional deposits were required to replace it. But deposits were not forthcoming from a depressed private sector that by then had developed a mortal fear of banks, and the Federal Reserve chose not to use its options to increase the money supply.
 
The money supply (M1) contracted by over one-third from 1929 to 1933, creating a classic deflationary cycle. As the supply of dollars decreased, the value of dollars increased. People began to hoard their money, further depleting M1 and stifling consumption, which in turn caused prices to decline, businesses to fail and unemployment to increase. As we point out here, deflation feeds upon itself and is self-perpetuating. It is said that Nobel Laureate Economist Friedman always referred to the 1929 to 1933 period as the “Great Contraction,” instead of the “Great Depression.”
 
That the Monetarist “Great Contraction” theory is widely accepted is given credence by actions of the Federal Reserve in today’s economy, wherein even the slightest hint of economic trouble triggers massive injections of liquidity.
 
One of the great ironies in American history is that the Great Depression might have actually been enabled by the very agency that was established to prevent it.   

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