Although there were underlying economic difficulties even earlier, most Americans considered one of the primary causes of the economic crisis in the 1930s that became known as the Great Depression to be the stock market crash of late October 1929. The US stock market had been undergoing an unprecedented expansion. Even average Americans were investing their savings in stocks, thinking to cash in on the boom and get rich quick. The value of stocks became vastly inflated, and when prices began to go down, there was a panic, people began unloading their holdings, and prices plummeted. October 29, 1929, became known as Black Tuesday, as thousands of investors were wiped out and billions of dollars were lost.

In the wake of the stock market crash, many banks, which for the most part were uninsured and unregulated, failed. When people realized what was happening, they made runs on the banks to withdraw their savings, which made the situation worse. Many people lost their jobs. The unemployment rate would eventually go above twenty-five percent. Because people had less money to spend, the economy slowed down. As less consumer goods were sold, industries stagnated, and more workers were laid off. Many people lost not only their savings, but also their homes, as they were unable to keep up with their mortgage payments.

The Tariff Act of 1930, also known as the Smoot-Hawley Act, was intended to protect US businesses from competition from overseas. However, European countries countered this US tax on imports by levying taxes on US goods, making it more difficult for US manufacturers to sell their products overseas.

All of these economic catastrophes were made worse by a crippling drought that struck the farmlands of the Midwest. The devastating environmental conditions were partially a result of unsustainable farming techniques. This area became known as the Dust Bowl because of the drought conditions that persisted for years.

Many Americans blamed President Herbert Hoover's slow and mediocre response in the early stages of these emergencies for the economic crisis becoming much worse than it might have been. Hoover believed that the situations would right themselves and took a hands-off approach at the federal level. Instead of intervening and taking decisive action, he merely made suggestions and requests to the states about what they might do to solve their problems. In response, angry people who had lost their homes as a result of the crisis began calling the shantytowns they were forced to move to "Hoovervilles."