goods produced.  When this happened either prices had to fall or wages had to rise.  Businesses did neither, as that would reduce their proficts.  As a result, consumers began to resort to credit, but that just created a bubble in the economy, as credit eventually has to be repaid, and the wages to pay it back didn't materialize. 

#3. Securities fraud came to light in the late 1920s.  Due to the rising profits of businesses caused by inflation outpacing wages, everyone wanted a piece of the action.  This attracted many unscrupulous characters who capitalized on everyones desire to own stock in the most successful companies.  Many of these schemers also offered options to buy stock on margin, where a loan was taken out to buy even more stock, and then the profit from the rising stock value paid back that loan, or was used to buy even more shares.  But in September, the fact that fewer people were buying goods caused a chain reaction. 

#4. Chain reaction: Farmers stopped buying, this caused the credit and margin purchases to default when expected gains were not realized.  With money no longer available spending dropped.  Declining spending reduced business revenues.  Businesses cut jobs to compensate for dwindling revenues, reducing incomes.  Reduced incomes led to even lower spending, and a vicious cycle erupted.  By 1932, unemployment was a staggering 25% (or more by some estimates), the stock markets were at only 10% of their August 1929 high, banks were closing in droves under threat of "runs," and the Great Depression had begun. 

Contrary to popular belief, the Stock Market Crash was NOT the cause of the Great Depression; but was rather a symptom of the economic conditions which led to the Depression. There were a number of causes, such as overproduction by manufacturing concerns, even though inventories were building. There was the belief (myth) which still rears its ugly head from time to time that the economy had entered a stage of perpetual growth. Rather than work off inventories, factories continued to produce, and inventory stockpiles continued to grow until demand was virtually eliminated. Another cause was lax lending practices by banks. Again, the belief was that the economy would continue growing; so banks made increasingly riskier loans. When those loans failed, banks were forced to call other loans which also went into default. Continuous loan losses caused many banks to close. At a time when there was no FDIC insurance, those with deposits in a failed bank lost everything. The mere rumor that a bank was in trouble often caused bank runs which would bring down an otherwise healthy bank.

A final element was overproduction of agriculture. Farmers did not understand the relationship between supply and demand; and believed that when prices declined, the answer was to produce more to make up the difference. Of course the effect was to push agriculture prices even lower; and many farms went into foreclosure. Foreclosures, of course were also bad for banks, which hastened their failure.

Some causes of the Great Depression in the United States:

The Wall Street Crash of 1929. The huge collapse in the Stock Market severely undermined confidence in the American economy. As a result, consumer spending and business investment, both essential foundations of a healthy capitalist economy, fell sharply. Their drop had a disastrous effect on the overall level of employment. With much lower demand in the economy, many businesses went bankrupt. Widespread bankruptcies led to mass lay-offs across the country.

Banking panics. Between the Wall Street Crash and 1932, when FDR was elected President, there were a number of serious banking panics, caused by a widespread loss of confidence in the ability of banks to stay afloat amid this unprecedented economic crisis.

All across America, millions of people rushed to get their money out of the bank, fearful of what might happen to their savings. Without deposit protection insurance, this was by no means an unsubstantiated fear. As people withdrew their savings, there was less money available for consumer spending and business investment. Lack of available funding continued to depress the economy even further.

Tariffs. American agricultural interests lobbied hard for the introduction of tariffs against cheap foreign imports. This had the effect of creating a massive surplus in domestic produce. Farm prices collapsed.

With other countries taking retaliatory trade measures against the United States, it was increasingly hard for American producers to sell their surplus goods abroad. But as demand was dropping at home, American producers couldn't sell their goods on the domestic market, either. As a result, there was nowhere for output to go but down. This happened just at a time when the country desperately needed increased economic activity.

The first issue was agricultural overproduction.  During World War I, there had been enormous demand from overseas, as some of the best farmland in Europe had been rendered unfarmable by the fighting, and many farmers had joined the military leaving their farms fallow.  When the war ended, the demand dropped.  New technology had also been invented in an effort to meet the demand from Europe.  These technologies included gasoline powered tractors, Tractor driven plows and other machines.  Mechanization further increased production, but high supply and low demand lead to lower prices.  In the past farmers has compensated by increasing production and making up for quality with quantity.  Unfortunately, this time the glut was too big, and unlike the past, they had debts to pay off from the cost of mechanization.  As a result many farm loans ended up under-water. 

The second issue was inflation.  Labor compensation did go up during the 1920s, but not as fast as consumer prices.  As a result, the "consumers" didn't have any money to spend, and industrial overproduction began to occur.  When this happens, industry has to start paying more or prices have to come down.  Unfortunately, neither occurred, leading to a very warped economy where a few were getting rich at the expense of everyone else. 

The third issue was unregulated securities.  With big corporations having huge profits, everyone wanted to get a piece of the action, and stock markets boomed.  Unfortunately this boom was largely a reflection of the rich getting richer, and the poor getting poorer.  Although some middle-class gains were made, many were only able to afford securities with loaned money, money that they would pay back as profits were realized, this is the fatal flaw of career gambling.  And of course where there's money trading freely, there are scammers.  Ponzi schemes were rampant usually claiming those who were using the loans, who were unable to buy securities from reputable dealers. 

In October 1929, this all came to a head.  Farm loans foreclosing caused agricultural securities to fall.  The number of these securities on loan caused the downturn to spread across the securities markets.  As securities began to fall, income that had masked declining consumer spending vanished, and consumer spending fell.  This caused even more securities to lose value, and soon a vicious cycle of cutbacks began.  When the cycle finally bottomed out, 25% of Americans were Unemployed, up to 80% were underemployed, and business profits were almost non-existant.