Explain why economy of USA was strong in the early 1920s.
Would you agree that the roots of great depression lay in this'boom'?
Give reason.
Answers
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The year of 1929 came to be known as the Great Depression because during this period most parts of the world experienced catastrophic declines in production, employment, income and trade.
Its Prominent factors were:-
1. Many countries financed their investments through loans from the US. In the early 1920s, the economy of the US was strong. But the over production in industrial and agricultural sector led to the depression.
2. There was a spunt in the purchase of refrigerators, washing machines, radios, gramophone players etc through hire-purchase. With the fall in prices and the prospect of depression, US banks slashed domestic lending and called back loans.
3. Farms could not sell their harvests, households were ruined and business collapsed. The consumerist prosperity of 1920s disappeared.
4. Faced with falling incomes, many households could not repay what they had borrowed. They even were forced to give up their homes, cars and other consumer durables.
5. US banking system collapsed between 1929 and 1933, over 4000 banks had closed and 110,000 companies had collapsed.