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The Causes of the Great Depression

What caused the Great Depression, the worst economic depression in US history? It

was not just one factor, but instead a combination of domestic and worldwide conditions that

led to the Great Depression. As such, there is no agreed upon list of all its causes. Here

instead is a list of the top reasons that historians and economists have cited as causing the

Great Depression. The effects of the Great Depression were huge across the world. Not only

did it lead to the New Deal in America but more significantly, it was a direct cause of the rise

of extremism in Germany leading to World War II.

From 1929 to 1939, the United States experienced one of the harshest economic

downturns in the history of the country. Initiated by the stock market crash of 1929, the

decade that followed was marked by high unemployment rates and bank failures. Workers

lost jobs along with their homes and possessions. Many of those who were able to keep their

jobs barely made enough to make ends meet. The value of currency declined steadily, and the

agricultural market spiraled downward. Panic spread throughout the country, and lives were

turned upside down.

By 1933, nearly half of the banks in the country had failed, and almost 15 million

people were unemployed. By spring of 1929, consumer spending had begun to decline, and

manufacturers faced a period of overproduction, resulting in a surplus of goods and a

slowdown in production. However, stock prices kept rising, despite the slowdown. On

September 3, 1929, the stock market reached its peak. Two days later, the market started to

drop.
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On October 24, 1929, known as Black Thursday, the stock market began to show

signs of trouble, and the bubble eventually burst. Panic set in and investors began selling their

shares at an alarming rate. On October 29, 1929, Black Tuesday, the stock market crashed,

and shares on the market became worthless. Investors who had bought shares on margin were

virtually penniless.

After the crash, chaos ensued in all sectors of the economy. Consumer spending

plummeted, factories slowed down production, and companies fired workers. The wages of

those still employed were cut, making it hard for people to support their families. American

consumers lost their homes to foreclosure and lost (or sold) many of their possessions.

After the stock market crashed, Americans feared that banks would soon fail. People

immediately began to withdraw funds from their accounts, causing thousands of banks to

close. Throughout the 1930s over 9,000 banks failed. Bank deposits were uninsured and thus

as banks failed people simply lost their savings. Surviving banks, unsure of the economic

situation and concerned for their own survival, stopped being as willing to create new loans.

This exacerbated the situation leading to less and less expenditures.

The failure of the banking system is another main cause of the Great Depression.

After the stock market crashed, people panicked and rushed to withdraw their funds from the

banks. Prior to the crash, banks participated in the practice of speculation buying, in which

they often used investors' funds and lent money to individuals for the purpose of buying

stocks. Investors could not repay what they borrowed, and banks could not repay the

investors from whom they had borrowed.

The Great Depression was an economic crisis that began with the stock market crash

of 1929 and lasted for nearly a decade. Two of the causes of the Great Depression included

the stock market crash of 1929 and bank failures that lasted throughout the 1930s. During this
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time, the nation faced high unemployment, people lost their homes and possessions, and

nearly half of American banks closed.

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Works Cited

Bagchi, Alaknanda. "Conflicting Nationalisms: The Voice of the Subaltern in Mahasweta

Devi's Bashai Tudu." Tulsa Studies in Women's Literature, vol. 15, no. 1, 1996, pp. 41-

50.

Brubaker, Bill. "New Health Center Targets County's Uninsured Patients." Washington Post,

24 May 2007, p. LZ01.

Wheelis, Mark. "Investigating Disease Outbreaks Under a Protocol to the Biological and Toxin

Weapons Convention." Emerging Infectious Diseases, vol. 6, no. 6, 2000, pp. 595-600,

wwwnc.cdc.gov/eid/article/6/6/00-0607_article. Accessed 8 Feb. 2009.