generally blamed for helping to cause the Depression.

The Great Depression was a global economic downturn that occurred in the 1930’s. This transnational panic had many causes depending on where in the world you are talking about, but there were some major causes that were universal.

A sharp decline in global trade around the 1930’s is though to be one major cause. Most historians point to the Smoot-Hawley Tariff Act as the primary culprit because it severely reduced foreign trade and resulted in many countries issuing retaliatory tariffs on imported goods. Especially hard hit were farming exports, which caused many farmers to default on their loans later.

Another possible cause was the overabundance of debt in global banks. There was so little regulation over the banking system in some countries that banks could lend $9 for every $1 they took in. This generated short-term but hollow profits and when loans were called in there were no liquid assets in place which forced inflation through the roof.

One final global cause has been called “productivity shock” and related to the global industrialization movements that were taking place at this time. Due to the sudden rise in productivity thanks to mechanized manufacturing techniques, global work hours fell leading to a fall in worker wages. This in turn led to a dramatic decrease in consumer spending, further weakening the already tottering economy.             

One of the main factors in the Great Depression was the almost complete collapse in the US banking system. The stability of a capitalist economy, such as America's, relies on a strong banking system which can provide regular supplies of credit and investment to individuals and businesses.

But, in the wake of the Wall Street Crash, American banks were unable to do this. Like most other businesses, their confidence had taken a huge hit when the stock market collapsed. And it wasn't only the banks who lost confidence; individual savers and investors did too. In the ensuing panic, tens of thousands of people literally queued around the block to withdraw their money from banks, which meant that the banks had less capital available to finance business investment. This had a damaging domino effect on businesses, many of whom relied on bank loans to keep themselves going. To make matters worse, banks started calling in their debts, which placed an additional strain on businesses, forcing many of them to the wall and creating a downward spiral of mass unemployment.

The Great Depression was caused primarily by a belief that the economy had entered a period of permanent growth, and there could be no negative consequences. As a result, caution was thrown to the winds, the economy spun out of control, and ultimately collapsed.

Several particular occurrences are indicative:

• The most obvious factor (although not the "cause" of the Depression) was wild speculation in the Stock Market, leading to unsustainable growth in the market which eventually (and suddenly) collapsed.
• Speculation in Real Estate, primarily in the Miami, Florida area. So called "binder boys" signed contracts to purchase real estate with a small binder fee, then sold the contract itself at a higher price. The new holder repeated the process such that the contract to purchase the property was sold many times over, each time at a higher price, until the price was unrealistically high. The price collapsed and the last buyer lost everything.
• Overproduction of manufactured goods which far exceeded demand. Even though there were signs that unsold inventory was increasing rapidly, factories continued to produce. Again, when inventory amounts became unrealistically high, factories stopped production and laid off workers.
• Poor lending practices by banks. The belief in permanent growth in the economy caused banks to loan money with abandon, quite often to those with poor prospects of paying them back. When the loans failed, banks were forced to call in loans on other borrowers, and the lending market collapsed. When banks could not recover their loans, they failed.
• Government monetary policy at the time encouraged saving rather than spending. As a result, purchasing declined and prices entered a downward spiral.
• The dollar was still tied to the gold standard, which limited growth. Stabilization could only occur when the economy deflated and prices fell. The end result was disaster.

Together, all these factors send the economy into a deflationary tailspin. As prices fell, consumers postponed purchases waiting on prices to fall further, which exacerbated the spiral. The end result was disaster for the economy.