The Great Depression was an extremely severe global economic depression, which took place mainly during the 1930s, mainly in the United States. The time of this Great Depression also varied across countries; in many countries, it began in 1929 and last until the early 1930s. This period experienced major financial turmoil and affected the whole economy of each country. With this kind of a global depression, the Great Depression has been linked to the Second World War. But this is not so, as the Great Depression also affected the international trade, which in today's world is so important for all the countries.
With the Great Depression, a lot of people suffered from a variety of economic problems. But with the help of the international trade, the industrial production improved in most parts of the world and the overall economy recovered gradually from the downturn. Moreover, the government injected a large amount of money into the economy to avoid the inflation. Thus, in the earlier stages of the Great Depression, the term “Great Depression” should have been wrongly used, but since in this economic history, the term has been correctly applied.
The first stage of this great depression was the Great Stock Market crash. In the third week of the October 29th, the stock market crash happened. When news of this crash reached the public, the consumers, business establishments, and the business organizations immediately closed down their operations. Though this was a natural tendency, yet due to the poor financial condition, the business institutions could not bear the losses and they immediately closed down their operations. Thus, this became the first stage of the Great Depression.
The second stage of this great depression was the onset of a new phase of bank insolvency. At this point, it was estimated that there were more than $600 billion dollars worth of assets in the hands of insolvent banks and financial institutions. The president of the US, Franklin Delano Roosevelt, intervened on the monetary policy and brought back normalcy in the banking sector. He introduced the Glass Beverley Act that allowed the national banks to resume their activities. The government also injected billions of dollars in the banking system to encourage banks to resume their activities and get back to their feet.
However, the Glass Beverley Act did not solve the problem of increased insolvency. This was because the unemployed people were not aware of the banks' practices and thus it took them some time to realize that their money was not sufficient to pay the bills. As a result, the unemployment rate rose sharply and reached to the worst levels. Thus, the Glass-Beverley Act did not help the economy and only helped the . . . . . . lenders by providing exemptions on the rates of interest and also waived off some taxes on the surplus cash in the banks had.
However, the government did introduce a new deal for the consumers and that was the stimulus package. The president of the United States, George W. Bush, offered indirect financial relief through the Federal Reserve System. This package provided additional funds to the banks to help them get back to their feet. The money was released after negotiations between the government and the private creditors. Thus, the Great Depression was finally overcome and the U.S. economy began a great recovery.