What Caused The Great Depression?

The Great depression is a very significant moment in the history of the United States. Very many banks did not thrive well in the months that came after the crash of the stock market of 1929. However, that was just a part of what happened. It is a very simplistic perception that cannot be taken as the only main cause of the great depression. Well, it is very interesting to learn the causes that led to such a downfall of the economy. The amazing story is the fact that the economy finally recovered from a contraction of that nature. This was the worst depression of the US economy ever. The causes were both a pull of both international and domestic causes. These are the major reasons documented as the causes of this hard-economic time.

The crash of the stock market in 1929 was one of the key causes of the Great Depression. It was not mainly the Great Depression as believed by some people but one of the causes. Those who held stock lost over $40 billion dollars. Another issue was the failures that were encountered in banks. In the 1930s, very many banks did not succeed. Bank deposits were not insured and therefore people simply lost all that they had saved in the banks. The only surviving banks were not sure of the situation and they too stopped to create other loans that led to less expenditure hence exacerbating the situation.

There was also a reduction in purchasing throughout the region and beyond. When the stock market crashed, people from all classes could no longer buy items. This finally led to a decrease in the production of products and ultimately a total reduction in the labor force. People lost jobs and could no longer pay for bills and items bought via installment strategies. As a result, owners took the items from them. Inventory increased the more while unemployment shifted upwards becoming a big challenge of alleviating the economic situation. The American economic policy in partnership with Europe that saw the imposition of high tax on imports led to less trade between foreign countries and America hence escalating the issue.

There were also drought conditions that largely contributed to the situation especially in Mississippi valley in 1930 that saw many people fail to pay debts and taxes. Ideally, the Great Depression caused uproar in the United States, something that had never been experienced before or even at this present age due to foreign policies, drought, crashing of the stock market, failure of banks and low purchasing power.