Unemployment in America went from 3 in every 100 workers to nearly 25 in just four years. The Great Depression remains the deepest economic collapse of the modern era.
Timeline
24 October 1929: Black Thursday
- StoryStock prices had climbed for years, pushed up partly by people buying shares with borrowed money. On this day, panic selling struck the New York Stock Exchange.
29 October 1929: Black Tuesday
- StoryPanic returned, worse this time. Over 16 million shares changed hands in a single day, and the market lost about 12% of its value.
1930: The Smoot-Hawley Tariff Act
- StoryThe US raised import tariffs sharply, hoping to protect American jobs and industry.
- ResultOther countries retaliated with tariffs of their own. World trade fell by more than 60% by 1934.
March 1933: The Bank Holiday
- StoryBy early 1933, panicked Americans were pulling $20 million a day out of banks. Newly inaugurated President Roosevelt declared a national Bank Holiday.
- HowEvery bank in the country closed for four days. Congress then passed the Emergency Banking Act, giving the government new powers to steady the financial system.
April 1933: Off the Gold Standard
- StoryThe US ended its gold standard — the system where the dollar’s value was fixed to a set amount of gold.
- ResultThis gave the government more room to expand the money supply. Many historians see it as one of the moves that finally eased the Depression.
Must Know
The 1929 Stock Market Crash
- StoryUS stock prices peaked in August 1929. Heavy speculation, much of it funded by borrowed money, had pushed prices well above what the underlying businesses were really worth.
- ResultWhen confidence broke, prices crashed hard on Black Thursday and Black Tuesday, in late October 1929.
The Wave of Bank Failures
- StoryRoughly one-third of all US commercial banks failed between 1929 and 1933.
- WhyWhen a bank failed, ordinary depositors often lost their savings completely. There was no deposit insurance yet to protect them.
Unemployment Hits One in Four
- StoryUnemployment rose from 3.2% in 1929 to nearly 25% by 1933. That means roughly one working American in four had no job at the Depression’s worst point.
Good to Know
The Smoot-Hawley Tariff Backfires
- StoryThe Smoot-Hawley Tariff Act of 1930 raised US tariffs on thousands of imported goods, to protect American industry.
- InsteadIt backfired. Other countries hit back with their own tariffs, and global trade shrank sharply as a result.
Roosevelt’s New Deal
- StoryPresident Franklin D. Roosevelt’s New Deal introduced sweeping recovery programmes from 1933 onward.
- HowThese programmes covered jobs, banking reform, and social welfare, aiming to rebuild both the economy and public trust in it at the same time.
✅ Test Yourself
Great to Know
The Depression That Inspired Keynes
- StoryThe Great Depression directly inspired Keynes’s later theories on government demand management, published in 1936.
- WhyWatching markets stay broken for years, with no quick self-correction, is exactly what pushed Keynes to argue governments must actively step in during a slump.
Friedman’s Rival Explanation
- StoryDecades later, economist Milton Friedman offered a different explanation. He blamed the US central bank, the Federal Reserve, more than weak demand.
- HowFriedman showed the country’s money supply shrank by about a third during the Depression. He argued the Fed could have prevented much of the damage, simply by pumping more money into the banking system.
A Cautionary Tale About Protectionism
- StorySmoot-Hawley is widely cited today as a warning: raising tariffs to protect jobs can backfire badly if trading partners retaliate.
- ResultThe crisis reshaped economic policy worldwide, expanding the role central banks and governments play in managing a modern economy.
Beyond the answer
Browse all indian-economy topics →
📚 Keep reading
Economy0021 — Protectionism and TariffsIndGeo0009 — Geography of Indian Agriculture: Crop Belts and Soil RegionsWorldHist0010 — The Weimar Republic: Germany's Fragile Democracy, 1919-1933SciTech0135 — Aircraft Black Boxes: Flight and Cockpit RecordersUPSC CSP 2018 — General Studies Paper I (Full Question Paper)❓ Practice this topic
Which of the following is a rabi crop, sown in winter and harvested in spring?Per capita income can rise while inequality also rises because:Which ministry oversees the National Statistical Office (NSO) that publishes India's national income data?Why is it important to note the base year when comparing GDP figures across different time periods?🎲 Take a Indian Economy Quiz
Leave a Reply