What was the top cause of the Great Depression? I am trying to decide between over-speculation with the stock market and buying on credit.I just would like to hone in on one major cause and then...

What was the top cause of the Great Depression? I am trying to decide between over-speculation with the stock market and buying on credit.

I just would like to hone in on one major cause and then do my research - any suggestions you may have as I try to build this paper would be appreciated.  Thanks so much!!

Asked on by julieplave

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thanatassa | College Teacher | (Level 3) Educator Emeritus

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Economists have many different theories about the major causes of the Great Depression. Many have to do with financial, monetary, and stock events. A theory worth examining, and that has come back into vogue to explain the current worldwide recession, is Inequality Theory. This is a theory that states that growing economic inequality destabilizes markets -- and society in other ways -- leading to depressions. One interesting historical fact that supports this is that the two periods of the greatest economic equality in the past century were the one just before the Great Depression and the current period, in which rising inequality ushered in a worldwide economic collapse. This also suggests that social policy to reduce inequality is needed to avoid and recover from depressions rather than merely tweaks to monetary policy.

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