Great Depression , Stock Market Crash of 1929 , FDIC emerged


The Great Depression was a severe worldwide economic downturn that began in 1929 and lasted through most of the 1930s. It was the worst and longest economic crisis in modern history.

Here are the key points:

📉 What caused it?

  • Stock Market Crash of 1929 (also called Black Tuesday): Sparked a panic and massive sell-off.

  • Bank Failures: People lost their savings as thousands of banks collapsed.

  • Dust Bowl: In the U.S., drought and poor farming practices ruined agriculture in the Midwest.

  • Global Trade Collapse: Countries raised tariffs (like the U.S. Smoot-Hawley Tariff), hurting global trade.

  • Overproduction & Underconsumption: Too many goods, not enough buyers.

  • Poor government policies: Central banks and governments often made the crisis worse by tightening money supply instead of stimulating the economy.

🏚️ What were the effects?

  • Mass Unemployment: In the U.S., unemployment reached around 25%.

  • Widespread Poverty: People lost homes, jobs, and hope.

  • Homeless camps, nicknamed “Hoovervilles” (after President Herbert Hoover), sprang up across the country.

  • Global Impact: The depression affected economies around the world, especially in Europe and Latin America.

📈 How did it end?

  • In the U.S., Franklin D. Roosevelt’s New Deal programs tried to provide jobs and stabilize the economy.

  • The economy only fully recovered with World War II, which created massive demand for labor and production.

 The Stock Market Crash of 1929 happened for a mix of reasons, kind of like a perfect storm. Here's a breakdown in simple terms:

💣 Why Did the Stock Market Crash in 1929?

1. Speculation Mania (People Gambling on Stocks)

  • Many people were buying stocks not to invest long-term, but to get rich quickly.

  • They thought prices would keep going up forever — but that’s not how markets work.

2. Buying on Margin (Borrowing Money to Buy Stocks)

  • Investors only paid a small % of the stock price and borrowed the rest from brokers.

  • When prices dropped even a little, brokers demanded repayment — and people didn’t have the money.

  • That caused a panic sell-off.

3. Overvalued Stocks

  • Stocks were trading way above their actual value. The economy wasn’t growing fast enough to support those prices.

  • Eventually, reality hit and prices started falling.

4. Lack of Regulation

  • The market was like the Wild West — no rules to prevent fraud or limit speculation.

  • No protections like the FDIC (Federal Deposit Insurance Corporation) that we have now.

5. Loss of Confidence

  • Once the market started dipping in September 1929, fear spread fast.

  • By October 29 (Black Tuesday), everyone was trying to sell at once — and no one was buying.

🧠 Quick Summary:

Too much hype, too much debt, no safety net. When prices started falling, fear took over, and the whole market collapsed like a house of cards.

The FDIC (Federal Deposit Insurance Corporation) was created in 1933 because of what happened during the Great Depression and the Stock Market Crash of 1929.

🏦 Why was the FDIC created?

After the crash:

  • Thousands of banks failed.

  • People lost their entire life savings because bank deposits weren’t insured.

  • This caused mass panic, known as bank runs, where everyone rushed to withdraw their money — which actually made more banks collapse.

To restore trust in the banking system, President Franklin D. Roosevelt and Congress passed the Banking Act of 1933, which:

  • Created the FDIC to insure bank deposits.

  • Gave people peace of mind that their money would be safe even if a bank failed.

💡 What does the FDIC do?

  • Insures your deposits up to $250,000 per account holder, per bank.

  • If your bank fails, the FDIC steps in and makes sure you get your money back.

  • It's one reason why modern bank runs are very rare in the U.S.

the FDIC is a direct result of the chaos from the Great Depression, designed to prevent that kind of financial disaster from happening again.

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