5 Causes of the Great Depression

By Luke Shaffer

Cause #1 - The Stock Market Crash of 1929

Undoubtedly this was the main reason of the Great Depression. Over the course of two months, stockholders lost more than $40 billion dollars. By the end of 1930 they started to recuperate but the hole was dug too deep.

Cause #2 - Bank Failures

Throughout the 1030's over 9,000 previously trusted banks failed. Almost all bank deposits were uninsured and the back lost its savings. Banks, now fearing closure gave out less and less loans exaggerating the problem even more.

Cause #3 - Reduction in Purchasing from Everyone

With fears of economic instability, everyone from every class reduced the amount they bought. With a reduction in consumers, a reduction in workforce was made. This, in turn, made it a vicious cycle until there was a major surplus in goods. Without jobs, adults couldn't support their families. Unemployment rose to 25%.

Cause #4 - Drought Conditions

With a drought going on at the same time most Mid-West people couldn't pay their taxes. While this was one of the more minor issues, it still added to the overall problem.

Cause #5 - American Economic Policy with Europe

Being panicked, the US government did all they could, including foolish actions. They introduced a tariff in hopes it would help. In 1930, the Smoot-Hawley Tariff was made to increase import tax to other countries. This, instead of helping, hurt our economy since trade started dwindling and some countries even retaliated economically.


Keegan, W.

Keegan, William. 2012. "Remember The Great Depression? No, It Doesn't Seem That Anyone Does". The Guardian. Accessed January 14 2016. http://www.theguardian.com/business/2012/jun/17/remember-great-depression-no-doesnt-seem-anyone-does.

Kelly, M.

Kelly, Martin. 2016. "Top 5 Causes Of The Great Depression". About.Com Education. Accessed January 14 2016. http://americanhistory.about.com/od/greatdepression/tp/greatdepression.htm.