What were the causes of the Great Depression?

Many historians point to the 1929 stock market crash as the cause of the Great Depression.

While there is no consensus among economists today when it comes to identifying the exact causes of the Great Depression, many historians believe that the 1929 stock market crash in the United States was the main cause of the Depression. Others, however, claim that the stock market crash was just a symptom rather than a cause of the Great Depression, pointing instead to a series of growing problems before the stock market crash that caused a volatile situation.

Decisions made by the United States Federal Reserve Board played a role in causing the Great Depression.

Several factors combined to become the causes of the Great Depression. The United States Federal Reserve made a series of decisions that contracted the money supply, and at the same time, banks in the United States began to fail. Whether these factors caused the stock market to crash is up for debate, but eventually the stock market crashed, causing a ripple effect across the world. Free markets took a hit and currency values ​​plummeted, and while interest rates also fell, most Americans felt pressured to the point of not wanting or wanting to spend their money.

Ultimately, the causes of the Great Depression were myriad, not just one action or condition that led to the crash. What could have been a less severe recession turned into a depression as consumer confidence plummeted; consumers just didn’t want to spend their money, which led to a slowdown in the economy. Further aggravated by bad faith on the part of the big banks that ended up collapsing catastrophically, the markets suffered as people felt it would be wise to avoid investing and spending until the markets straightened out. This led to a reduction in demand.

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Other economists believe that the causes of the Great Depression can be attributed more to regulatory errors made by government agencies. When banks began to fail, the Federal Reserve simply watched and waited to see what would happen. Some economists argue that the Federal Reserve should have stepped in to prevent the big banks from failing, thereby preventing the widespread panic that led to a run on money. Others, however, believe that capitalism itself is doomed when too much capital is made by a single entity. This Marxist view essentially points the finger at the overaccumulation of wealth as a social problem to be solved, not simply an economic one.

These economic problems were not unique to the United States. The Great Depression spread to major markets around the world and Europe also felt the devastating effects of the depression. Historians and economists often point to World War II as the end of the Great Depression, as manufacturing jobs were created to create armaments and other war necessities.

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