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President’s Ad Hoc Committee on the Economy: 1929
Roy A. Young
The Great Depression
Hannah Molitoris
Shore Regional High School
The trust Americans once had in the American banking system is now and will be
for some time deteriorated. Americans that believed their hard earned money was safe
will rely instead on hiding whatever money they can save in their mattresses, unless this
committee does what is necessary to not only recover from the economic stutter, but the
support of the American people. In order for the country to return to a state of normalcy,
the American people cannot base their credit score on a false history. Instead of taking
out loans they cannot afford to pay back and living on credit that will eventually lead to
their demise, people should use responsibly banking. The Stock Market Crash of 1929,
however, cannot be blamed simply on those bankers and prominent business members.
The underlying problems had been hindering for years to come.
The Stock Market Crash of 1929 was not alone the reason for the Great
Depression. Years of turmoil and international depression led to the aftermath that
affected the United States for twelve years. A prevalent reason for the stock market crash
was the uneven distribution of income. In the United States, the top five percent of the
richest Americans received thirty three percent of all income (Newman 492). This meant
the majority of Americans were not even making close to what the tycoons were bringing
in. People have believed since the beginning of time that if one person can get rich,
anyone can get rich. Therefore, stock market speculation was a major problem in the
United States. People stopped investing money to share the profits of a company, they
wanted the price of the stock to peak so they could double or even triple their profits.
Overproductions of consumer goods along with the weak farm economy were two
looming problems in the American economy. Large business that used complex
technology believed it was easier and cheaper to keep production going even when it was
not necessary. The supply and demand balance was so off, Americans could not only not
afford to buy the products companies were selling, there was an a large volume of goods
remaining unused.
During 1907, a major financial crisis came from the steep decrease in the stock
market Americans realized a centralized bank was necessary. Because of the actions of
two bankers the stock market soared and halted. These two bankers attempted to reinstall
the status of the American stock market by creating a virtual monopoly of the copper
industry. Shares dropped from sixty-two dollars to fifteen dollars. Other bankers such as
JP Morgan attempted to solve the situation that had been created to put American faith
back in the stock market. The fast solution they provided led again to a flawed trust and a
flawed system. These tycoons instead invested their own money into a failing system.
The Panic of 1907 led to the creation of a stable idea. This idea would attempt to solve
the crumbling foundation the American economy had been founded on.
The unpredictable economy led to the creation of the Federal Reserve, a
centralized baking system that would hopefully prevent a future panic. In an attempt to
“furnish an elastic currency, to afford means of rediscovering commercial paper, to
establish a more effective supervision of banking in the United States” (Federal Reserve
Act). The goal of the Federal Reserve was to provide a stable solution of panic ever
struck again. Americans would feel safe depositing their money because they would be
guaranteed to draw their funds. Banks that used the Federal Reserve would deposit the
reserves into the Federal Reserve that would eventually strengthen the United States
economy. The Federal Reserve system eliminated the domination of privatized banking
institutions by tycoons.
Although many may argue that the Federal Reserve system is what caused the
Great Depression and the Stock Market crash, it is easy to put the blame on a certain area
of the United States economy. However, it would be ignorant to ignore all the driving
forces at hand. After the Federal Reserve was established in 1913, banking leaders were
put in charge of the newly created body. The lack of regulations also led to the control of
the stock market, which when it did not immediately flourished led to the blame. Banks
even before the stock market crash and the Federal Reserve had a history of closing due
to a lack of funds. However, without the Federal Reserve the growth of business would
not be possible. Banks gave loans on securities, investments, real estate mortgages and
credit. The United States banking system is in no way an unflawed system. The
committee should realize the potential in creating a strong Federal Reserve one that
would be re-enforced.
The best way to get the United States economy back on track is to freeze
the interest rates until the first of the year. This would include not only mortgage but,
land and farm. The farm industry has suffered from overproduction, high debt, and low
prices. Freezing the interest rate will allow Americans get money back in their pockets
and get money to put back into the banks. The economy can use the benefits of this freeze
to get return to a state of normalcy.
Works Cited
Newman, John. Unites States History. New York: Amsco School Publications, Inc, 1998.