Economic Depression

What is an Economic Depression?

An economic depression refers to a period of severe economic deterioration.  While there is no true definition for a depression as there is for a recession, it can be characterized as a period with many of the following characteristics:  unemployment rates jump dramatically (typically into double digits), GDP takes a dive (10% or more), bank lending dries up, high levels of corporate bankrupcies, and an overall tightening of all trade and consumption.

The Great Depression

The most notable depression in the history of the United States is the Great Depression of the 1930's.  It was kicked off in October of 1929 with the great crash in the stock market and spread throughout the rest of the world in an expeditious manner.  Some blame a massive level of speculation in the stock market and an absence of a middle class for leading factors.  This uneven distribution of wealth led to an unstable condition where manufacturing output was outpacing demand for goods and services.  The roaring 20's masked this problem in a sense as the stock market was in a major bull market run which abruptly came to a halt when the market became overheated with excessive speculation by the masses.  Once the crash of 1929 hit, a majority of low income and middle income Americans lost their purchasing power overnight.  As the consumer fell, so did the rest of the economy.  Unemployment rates were at 25%, many were homeless, banks stopped lending, prices severely deflated, warehouses became stockpiled with oversupply while manufacturing came to a near halt. 
Tim Ord
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