I want to learn more about The Great Depression of 1929
1. What were the input factors that caused this ?
2. What was the impact to the economy, stock market, jobs market, gold market, bond market , bold yield rates ?
3. which part of society were most and least affected?
4. Which groups of society thrived ?
The Great Depression of 1929 was one of the most severe economic downturns in modern history. Let me break down your questions systematically.
1. Input Factors That Caused the Great Depression
The Great Depression resulted from a combination of interconnected factors:
Stock Market Speculation and Overvaluation: Throughout the 1920s, stock prices rose far beyond their fundamental values, driven by excessive speculation and margin buying (purchasing stocks with borrowed money). Many investors bought stocks with only 10% down payments.
Banking System Weaknesses: The banking system was fragmented and poorly regulated. Many banks were small, undercapitalized, and lacked deposit insurance. When banks failed, depositors lost their savings entirely.
Unequal Income Distribution: While the economy appeared prosperous in the 1920s, wealth was heavily concentrated among the rich. The top 1% controlled about 40% of the nation's wealth, limiting consumer purchasing power for the broader population.
Agricultural Depression: Farmers had been struggling throughout the 1920s due to overproduction, falling crop prices, and high debt burdens from land purchases during World War I's agricultural boom.
International Economic Problems: European economies were still recovering from World War I, with high war debts and reparations payments creating instability. The U.S. had also imposed high tariffs, reducing international trade.
Federal Reserve Policy: The Fed raised interest rates in 1928-1929 to curb stock speculation, but this tightened credit and contributed to the economic contraction.
2. Economic Impacts Across Markets
Stock Market: The Dow Jones Industrial Average fell approximately 90% from its 1929 peak to its 1932 trough. Stock market capitalization collapsed from about $87 billion to $15 billion.
Economy Overall: Real GDP declined by roughly 30% between 1929 and 1933. Industrial production fell by about 50%, and the economy didn't return to 1929 levels until the early 1940s.
Jobs Market: Unemployment rose from 3.2% in 1929 to approximately 25% in 1933. In some cities and industries, unemployment reached 50% or higher. Even those who kept jobs often faced significant wage cuts.
Gold Market: Initially, gold prices remained relatively stable due to the gold standard, but after the U.S. abandoned the gold standard in 1933 and devalued the dollar, gold prices increased from $20.67 to $35 per ounce.
Bond Market and Yields: High-grade corporate and government bond yields initially fell as investors fled to safety, but lower-grade corporate bonds saw yields spike dramatically as default risk increased. Many corporate bonds became worthless as companies failed.
3. Most and Least Affected Parts of Society
Most Affected:
- Industrial Workers: Faced massive unemployment, especially in manufacturing, construction, and heavy industry
- Farmers: Already struggling in the 1920s, they faced complete collapse with falling crop prices and widespread foreclosures
- African Americans: Faced unemployment rates of 40-50% in many areas, often being "last hired, first fired"
- Elderly: Had no social safety net and often lost life savings in bank failures
- Recent Immigrants: Faced discrimination in hiring and were often deported to reduce competition for jobs
Least Affected:
- Government Employees: Generally maintained steady employment and income
- Professionals in Essential Services: Doctors, lawyers, and other professionals in stable practices
- Wealthy Individuals with Diversified Assets: Those who hadn't overleveraged in stocks and owned real estate, bonds, and other assets
- Some Rural Subsistence Farmers: Those who grew their own food and weren't heavily involved in cash crop markets
4. Groups That Thrived
Very few groups actually thrived during the Depression, but some managed to benefit:
Opportunistic Investors: Those with cash who could buy assets at rock-bottom prices, including real estate, stocks, and entire businesses. Families like the Kennedys expanded their wealth significantly.
Chain Stores and Discount Retailers: Companies like A&P grocery stores and Woolworth's expanded by offering low prices, while many independent retailers failed.
Entertainment Industries: Movie theaters, radio, and some forms of cheap entertainment actually grew as people sought affordable escapism. Hollywood's golden age coincided with the Depression.
Certain Government Contractors: Companies involved in New Deal programs like dam construction, road building, and other public works projects.
Bootleggers and Organized Crime: The continued prohibition of alcohol until 1933 provided opportunities for illegal enterprises.
Bankruptcy Lawyers and Debt Collectors: Legal professionals specializing in financial distress saw increased business.
The Great Depression fundamentally changed American society and economics, leading to increased government regulation of financial markets, the creation of social safety nets like Social Security, and a new understanding of the government's role in managing economic cycles. The lessons learned influenced economic policy for decades and continue to inform responses to financial crises today.
These are important questions that reveal the human tragedy behind the economic statistics of the Great Depression.
Suicide Rates by Demographics
Men experienced dramatically higher suicide rates than women during the Depression. The male suicide rate peaked in 1932 at about 39 per 100,000, compared to roughly 9 per 100,000 for women. This pattern reflected several factors:
Middle-aged and older men were particularly vulnerable, especially those who had been successful businessmen, professionals, or investors. The loss of status, income, and identity as breadwinners proved devastating. Many had built their entire self-worth around financial success and couldn't cope with sudden poverty.
White-collar professionals and business owners had higher suicide rates than blue-collar workers, who were more accustomed to economic uncertainty. The fall from middle-class respectability to destitution was psychologically devastating for those who had never experienced financial hardship.
Rural farmers also experienced elevated suicide rates as they lost family farms that had been in their families for generations.
Selling Children
Yes, heartbreakingly, some families did sell or give away their children during the Depression. This occurred in several ways:
Informal Adoptions: Desperate families sometimes gave children to relatives or better-off families who could provide for them, sometimes with small payments involved.
Orphanages: Many families voluntarily placed children in orphanages, hoping it was temporary. Orphanage populations swelled during this period.
Child Labor: Some families sent children to work for other families as domestic help or farm workers in exchange for room and board.
"Baby Sales": Newspaper classified ads sometimes appeared offering children for adoption in exchange for money to cover "expenses," though this was more about desperate parents seeking homes for children they couldn't feed.
These situations were typically driven by genuine inability to feed and house children rather than profit motives, making them particularly tragic.
Real Estate and Rent Impacts
Real Estate Prices: Property values collapsed, falling 30-40% nationally between 1929 and 1933. In some areas, the decline was even steeper. Foreclosure rates skyrocketed as people couldn't make mortgage payments.
Rental Prices: Rents fell significantly, often by 20-30%, but this didn't help much because unemployment was so high. Many people doubled up in housing arrangements or moved in with relatives. Vacancy rates soared in many cities.
Housing Construction: New construction virtually stopped, with housing starts falling by about 90% from their 1920s levels.
Bond Yield Impact
The bond market experienced a complex dynamic:
High-Grade Government and Corporate Bonds: Yields actually fell initially as investors fled stocks for the perceived safety of bonds. Treasury bond yields dropped as people sought safe havens.
Lower-Grade Corporate Bonds: Yields rose dramatically as default risk increased. Many corporate bonds became worthless as companies failed entirely.
Newly Issued Bonds: Companies that could still access credit markets had to offer higher yields to attract investors due to increased risk premiums. However, many companies simply couldn't issue new bonds at all because investors wouldn't buy them at any reasonable price.
Municipal Bonds: Many local governments faced fiscal crises, so their bond yields rose sharply. Some municipalities defaulted entirely.
Food Destruction
Yes, one of the most tragic paradoxes of the Depression was the destruction of food while people starved:
Agricultural Overproduction: Farmers produced more food than the market could absorb at profitable prices, leading to deliberate destruction to try to raise prices.
Specific Examples:
- Farmers dumped milk into ditches rather than sell it at ruinously low prices
- Crops were plowed under instead of being harvested
- Livestock was slaughtered and buried rather than brought to market
- Fruit was left to rot on trees
The Paradox: This occurred simultaneously with widespread hunger and malnutrition in cities. The problem wasn't lack of food but lack of purchasing power and distribution systems to get food from surplus areas to hungry people.
Government Programs: Later New Deal programs like the Agricultural Adjustment Act actually paid farmers to destroy crops and reduce production, which seemed particularly cruel to many observers given the widespread hunger.
Bread Lines and Soup Kitchens: While food was being destroyed in rural areas, cities saw long lines of hungry people waiting for free meals from charities and government programs.
This destruction of abundance amid want became one of the most powerful symbols of the Depression's economic irrationality and helped fuel support for New Deal programs that aimed to better coordinate production and distribution of goods.
The human cost of the Great Depression extended far beyond economic statistics, fundamentally altering family structures, social relationships, and people's faith in economic institutions for an entire generation.
Based on my knowledge and the information available, here's a breakdown of which stock sectors were most and least affected during the Great Depression:
Sectors That Dropped the Most
Banking and Financial Services: The banking sector took a substantial hit as numerous banks had heavily invested in the stock market and now faced insolvency Unraveling the 1929 Stock Market Crash: Causes, Impact & Enduring Legacy. Bank stocks lost 80-90% of their value as thousands of banks failed. Major banks like Bank of United States collapsed entirely.
Heavy Industry and Manufacturing:
- Steel Companies: U.S. Steel and other steel producers saw massive declines as construction and manufacturing demand collapsed
- Automobile Industry: General Motors, Ford, and Chrysler stocks plummeted as car sales dropped by over 75%
- Railroad Stocks: Rail companies were devastated as freight and passenger traffic declined sharply
Consumer Discretionary:
- Department Stores: Retailers like Woolworth's and major department stores saw massive declines as consumer spending collapsed
- Luxury Goods: Companies producing non-essential items were hit particularly hard
- Entertainment: Movie studios and entertainment companies, despite some later recovery
Construction and Real Estate:
- Construction Companies: Building activity virtually ceased
- Building Materials: Cement, lumber, and other construction-related stocks collapsed
Sectors That Were More Resilient or Rose
Utilities: These were reasonable choices for expectations of growth The 1929 Stock Market Crash – EH.net, and utilities were among the sectors mentioned as having some investment interest. Electric and gas utilities were relatively stable because people still needed basic services, though they did decline, just less severely than other sectors.
Food and Basic Consumer Goods:
- Grocery Chains: Companies like A&P actually expanded during the Depression by offering low prices
- Tobacco Companies: People continued smoking despite economic hardship
- Basic Food Producers: Companies producing staple foods maintained some stability
Gold Mining: Gold mining stocks actually performed well after the U.S. went off the gold standard in 1933 and devalued the dollar, making gold more valuable.
Discount Retailers: Chain stores and companies that could offer low prices to cash-strapped consumers sometimes thrived.
Important Context
The crash was so severe that This 79% stock market loss was the worst drop of the past 150 years. Very few sectors were truly "unaffected" - the entire market experienced devastating losses. Even the most resilient sectors typically declined by 30-50%, while the hardest-hit sectors lost 80-95% of their value.
Technology Sectors of the Era: They included airplanes, agricultural implements, chemicals, department stores, steel, utilities, telephone and telegraph, electrical equipment, oil, paper, and radio Radio and early aviation stocks, which had been high-flyers in the 1920s, experienced particularly dramatic falls.
The key distinction wasn't so much between sectors that rose versus fell, but rather between those that were completely devastated versus those that "only" lost 30-50% of their value. The entire market was caught in a deflationary spiral that affected virtually every sector of the economy, with the severity varying based on how essential the sector's products or services were to basic survival and daily life.
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