There is also a definition of economic depression, which is a period of low general economic activity marked by rising levels of unemployment. There is also a drastic decline in an economy characterized by decreasing business activity, falling prices and unemployment (American Heritage College Dictionary).
There were many business problems such as the international issues. During the war many international countries took out loans from larger American banks. Many of the European countries were having economical struggles, which snowballed, onto the United States. This snowball effect lead to the falling economies of the countries would simply default on the loans. One reason the economies were not doing so well was due to the strains on the currency that were reducing European wages. .
Along with entire countries defaulting on loans there were individual consumers who borrowed money to purchase stock. This was known as buying on margin. This was a good procedure because once the stock made money they could pay the loan back with interest. This strategy did not work so well when the price of the stock went down and people were forced to pay for stock that was not worth anything. Of course the only other choice was to default on their loans (Tuleja, 159).
The above two events caused the closing of many banks. Many banks filed bankruptcy. There were five thousand banks that had to close their doors during the depression. The closings were because they had no income and people could not to pay their loan bills. The problems with banks also resulted in nine million savings accounts being wiped out. Along with the savings accounts, depositories also lost 2.5 billion dollars (Wiegand, 246).
The stock crash had a large influence on the depression. Because so many people were buying on margin, when stock prices dropped many people lost money. The actual date of this event was October 29, 1929.
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