What are the factors that led to the Great Depression?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There is some dispute about what caused the Depression, but most history books look at the following factors:

  • The stock market crash.  This was the start of the Depression, but it was not really a cause.  There had to be other problems that could make a stock market crash lead to such a deep depression.
  • Economic inequality.  The rich had too much of the money and the rest did not have enough.  
  • Overproduction.  Firms were producing too much relative to people's ability to buy.
  • Unsound banking system.  The banks were lending money in dangerous ways and the deposits were not insured.  When the crash happened, banks failed and people lost their savings.

The Depression then got worse because of a lack of government intervention to help fix the economy.  In fact, the government did some misguided things like raising tariffs, thus killing world trade.

All of these factors are generally blamed for helping to cause the Depression.

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