What Caused The Great Depression?

The Great Depression was not caused when the market crashed but they were related. Both were caused by the problems building up in 1920s.

The 1920s were a period before the Depression and after WWI, when the stock market and economy boomed. The National Income jumped 40% to 87 billion. Credit also became popular. People were told to buy now and pay later.

During the Roaring 20s there was a farm depression. Farmers produced more food for WWI, but when the war ended there was less need for the goods. Prices of farm products fell 40%. The farm depression led up to the Great Depression. When the farmers went broke, they could not pay their mortgages. They had to rent farms and move. Banks also started to go bankrupt during the 1920s. The banks went broke because the farmers were not doing well. About 550 banks went broke in a year because of the farm failures.

Another reason for the Depression was that not all people got richer during the Roaring 20s. The rich just got richer and the poor just kept getting poorer. The businesses were doing well. So, the rich people who owned them got wealthier. The workers pay didn't increase much. They did not have enough money for all the goods they wanted. So, they bought on credit. Soon their people bought less because they were in debt. With less and less people spending money, businesses went broke.