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Explain the causes of the Great Depression.

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Stock Market Crash of 1929 - On Thursday, October 24, the market plunged at the opening bell, causing a panic. Though investors managed to halt the slide, just five days later on "Black Tuesday" the market crashed, losing 12 percent of its value and wiping out $14 billion of investments. Two months later,... read more
Stock Market Crash of 1929 - On Thursday, October 24, the market plunged at the opening bell, causing a panic. Though investors managed to halt the slide, just five days later on "Black Tuesday" the market crashed, losing 12 percent of its value and wiping out $14 billion of investments. Two months later, stockholders had lost more than $40 billion dollars. Even though the stock market regained some of its losses by the end of 1930, the economy was devastated. America truly entered what is called the Great Depression. Bank Failures - The stock market crash rippled throughout the economy. Nearly 700 banks failed in waning months of 1929 and more than 3,000 collapsed in 1930. Federal deposit insurance was unheard of. Instead, when banks failed, people lost their money. Others panicked, causing bank runs as people desperately withdrew their money, forcing more banks to close. By the end of the decade, more than 9,000 banks had failed. Surviving institutions, unsure of the economic situation and concerned for their own survival, became unwilling to lend money. This exacerbated the situation, leading to less and less spending. Reduction in Purchasing Across the Board - With their investments worthless, their savings diminished or depleted, and credit tight to nonexistent, spending by consumers and companies alike ground to a standstill. As a result, workers were laid off en masse. As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans; repossessions and evictions were commonplace. More and more inventory began to accumulate. The unemployment rate rose above 25 percent, which meant even less spending to help alleviate the economic situation. 0 read less
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The stock market crash of 1929 touched off a chain of events that plunged the United States into its longest, deepest economic crisis of its history. It is far too simplistic to view the stock market crash as the single cause of the Great Depression. A healthy economy can recover from such a contract...
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The causes of the Great Depression were(i) Conditions created by war There was an immense industrial expansion due to the increased demand of goods supplied to the army, during the period of the First World War. After the war, the demand for these goods suddenly dropped and so, there was no demand in... read more

The causes of the Great Depression were
(i) Conditions created by war There was an immense industrial expansion due to the increased demand of goods supplied to the army, during the period of the First World War. After the war, the demand for these goods suddenly dropped and so, there was no demand in many industries. There was also a large fall in the agricultural prices due to reduced demand.
(ii) Over production in agriculture Agricultural over production was another major factor responsible for the depression. This was made worse by falling agricultural .prices. As prices slumped and agricultural incomes declined, the farmers tried to increase the production and bring a larger volume of produce to the market to maintain their overall income. This worsened the situation by pushing down the prices of farm produce further.
(iii) Shortage of loans In the mid-1920s, many countries financed their investments through loans from the USA. While it was often very easy to raise loans in the USA during the boom period, lenders in the USA panicked at the first sign of trouble. Countries that depend crucially on US loans, now faced an acute crisis.
(iv) Multiple effect With the fall in prices and the prospect of a depression i.e. banks in the USA slashed domestic lending and some stopped bank loans, thousands of banks went bankrupt and were forced to close down. Factories closed, leading to unemployment, which further aggravated the crises. The US banking system collapsed.
(v) Large-scale unemployment Farm could not sell their harvests, businesses collapsed. As a result, large scale unemployment occurred.

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