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Question

My friend and I are having a discussion and need an answer to the following questions:
What caused the recession that began in the United States in 1929? Why did the decline continue for four years? Why did the decline occur at such a steep rate? Why did real output not regain its 1929 level until 1939? Why did the unemployment rate remain so extraordinarily high throughout the 1930s? Why has no recession or depression of even remotely comparable severity occurred since World War II?

Answer 1

What caused the recession that began in the United States in 1929?

Europe was already in a recession. Lack of exports. Bear in mind the Dust Bowl that crippled so many farmers.
The most critical cause was the crash of the stock market. This ocurred primarily as a result of so many investors who were able to buy stock on a 10% margin, meaning they only paid 10% down, with the expectation that stocks would continue to rise. As stocks declined, the investor had to come up with the loss, in cash. Some were stretched so deep that they couldn't pay the margins of loss and they lost the stock or depleted any savings to pay the losses. This created a decline in the values, which sold at great losses, creating a snowball effect. The rest is history, as the market plunged. Many thousands of investors lost everything as the stocks became worthless.

Why did the decline continue for four years?

So many people began drawing their savings from banks that the banks did not have the cash. Bear in mind that banks have their money invested, such as home morgtages and other investments. Since so many lost their assets and not able to pay off creditors, the banks also lost assets and failed. The run on the banks was halted by FDR and banks were closed.
Most savings were lost, as their was no such thing as FDIC insurance to protect depositors. Insurance was also enacted by FDR. As businesses failed, jobs were lost and unemployment sky rocketed, making matters worse.

Why did the decline occur at such a steep
rate?

When US went into depression, Europe fell even deeper into their depression which in turn resulted in less and less exports. All of the above worsened the situation. No one had money or credit to purchase much.
(Pork chops were 10 cents per pound, but no one had 10 cents). Farmers slaughtered and buried thousands of pigs with no value and plowed under crops that couldn't be sold.
Even those workers who had a job, were often not paid in US currency. They were paid in "Script", which was much like a credit slip, which was honored by local businesses, in exchange for merchandise. "Script" was then paid by the manufacturers, with cash, as it became available to them.
FDR created the WPA, which entailed many streets being paved with used bricks. These had to be cleaned before use. Workers were paid $1.00 per day. He also created the CCC camps, which employed young men for room and board. Most of our National Parks and cave attractions were created by CCC workers.
Some food distribution was initiated by FDR. I, myself, was given a half pint of milk every day, at school. We also were required to take a teaspoon of Cod Liver Oil each day.

Why did real output not regain its 1929 level until 1939?

Previous to 1939, Germany and Japan were preparing for war. Japan had bought all the scrap metal and wrecked cars that they could get their hands on from the US. They cleaned out the US junk yards. Japan always made toys from cans and scrap which were then sold to the US. (No plastics then). This time, unknown to anyone, they were building a war machine. Japan had NO steel production at that time, and began to purchase steel. Mitsubishi built all the Japanese Zeros of WWII, and with that wealth, the family now builds and sells products and cars to the US.
The invasions by Germany and the resultant defense preparations by UK and others, resulted in arms manufacturing in the US, which were sold to UK, France, and others.

Why did the unemployment rate remain so extraordinarily high throughout the 1930s?

The above answers that, plus the fact that WWII became a reality with US involvement. After Dec. 7, 1941, the mobilization by US was the fastest and largest of any country in history.

Why has no recession or depression of even remotely comparable severity occurred since World War II?

The stock market is a great deal safer since investors need much more advances in order to purchase stocks. Banks carry FDIC insurance on deposits up to $100,000.00, which protects most savers from loss, should a bank fail.

This is actually pretty brief, but most from my memory. My father had a business and a local mine disaster killed 900 workers, most who owed my father as a creditor. He lost the business and any cash in the bank. He worked at anything he could, plus raised a garden. He wall papered a room, walls and ceiling, for $1.00, with furniture, $2.00.
My Grandparents lost $800.00 in the bank failures. That was about a years earnings for an employed worker.

Answer 2

this is of course a huge topic in economics with varying theories. the classic answers from school...

just read the link.
http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression