How did the great depression happen, what caused it???
In general, theories about the causes of the Great Depression can be classified into three economic groups: * Orthodox/classical liberal, Keynesian, and neoclassical economics, which focus on the macroeconomic effects of money supply including production and consumption * Marxist economics, which argues that the root causes of the Depression are based in the fundamental production relationships of capitalism * Heterodox theories that argue the Great Depression was caused by particularly acute cyclical factors.
The Great Depression in Outline It is straightforward to narrate the slide of the world into the Great Depression. The 1920’s saw a stock market boom in the U.S. as the result of general optimism: businessmen and economists believed that the newly-born Federal Reserve would stabilize the economy, and that the pace of technological progress guaranteed rapidly rising living standards and expanding markets. The U.S. Federal Reserve’s attempts in 1928 and 1929 to raise interest rates to discourage stock speculation brought on an initial recession. Caught by surprise, firms cut back their own plans for further purchase of producer durable goods; firms making producer durables cut back production; out-of-work consumers and those who feared they might soon be out of work cut back purchases of consumer durables, and firms making consumer durables faced falling demand as well. Falls in prices–deflation–during the Depression set in motion contractions in production which riggered additional fa
The great depression happened because the majority of America was spending more than they made. Which just happened in 2005. We were buying things on credit and as a result the value of the dollar decreased. The value of the dollar decreased so much because the government had to keep borrowing money from other countries to supply the banks with the money they needed to cover the loans that they were lending to the public, in order to finance the items thwy were buying on credit. We attempt to keept his from happening by raising the interest rates (Federal Reserve Rate) which makes it less attractive to finance things. People will soon learn that they dont’ have to keep up with the Jones’s when the Jones’s are making twice what you make. If you can’t pay cash for it, you dont’ need it!
