Explain why economy of USA was strong in the early 1920s. Would you agree that the roots of the Great Depression lay in this ‘boom’?
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.
The Great Depression was caused by several factors. Its prominent factors were
(i) 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. ,
(ii) It was (hiring this period, Henry Ford used ‘assembly line’ method to achieve mass production. Mass production lowered costs and prices of engineered goods.
(iii) There was a spurt in the purchase of refrigerators, washing machines, radios, gramophone players etc through hire-purchase. With the foil in prices and the prospect of depression, US banks slashed domestic lending and called back loans.
(iv) Farms could not sell their harvests, households were ruined and business collapsed. The consumerist prosperity of 1920s disappeared.
(v) 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.
Hence we can say that the roots of Great Depression lie in this ‘boom’. The aforementioned reasons explain the given statement.