Causes of the Great Depression

The Causes of the Great Depression

When one takes a close look at the Great Depression and the events surrounding it, it becomes quite clear that there was no singular cause for such a drastic economic decline. Instead, there were several circumstances and events that caused the Great Depression which occurred around 1930 and has been referred to as the “worst economic crisis in American history.” Almost everyone knows about, or has at least heard about, the Great Depression, however many do not know what exactly caused the meltdown.

The first, and probably the most well known of the causes of the Great Depression was the stock market collapse of 1929. While the majority of Americans believe this to be the one and only cause of the depression, this is not true at all. The stock market crash of 1929 caused stockholders to lose approximately $40 billion collectively. The stock market had thrived for most of the 1920s but when the “bull market” reached its apex, the market began to decline and people began selling shares. This selling frenzy began to sweep across the entire market and this caused the value of the stocks to then decline. This presented a problem because of the lines of credit many people had taken out in order to cover their shares which were now worth much less than anticipated. Because the stocks were not worth as much as they once were, selling them in order to pay back the debts people had from investing in the stock market initially was inadequate, causing an even deeper debt to be owed.

Another major cause of the Great Depression lies in the enormous gap between the wealthy and the poor of this time period. This was a period in time where the majority of the nation's wealth was heavily concentrated into a vast minority of the people living in the United States at the time. This presents a problem because that wealthy portion of the nation is primarily composed of those