What are the causes of economic depression?
An economic depression is defined as a sustained or prolonged period of recession, or a significant downturn in one or more economies. Because a depression is a prolonged recession, it’s best to look at the circumstances that cause recessions.IdentificationAlthough economists differ greatly on what constitutes recessions and depressions, the rule of thumb is that a recession is two or more quarters of reduced dross domestic product (GDP). This means production stops growing at an increasing rate and begins to shrink, which means fewer jobs and less money, buying and investing.Easy Credit CauseNearly every significant recession and depression was preceded by a period of lax credit standards for lending. This happened in the Great Depression, when people bought too much stock on credit.Swindlers and Mania CauseAnother telltale sign that precedes recessions is when swindlers create a mania over a certain financial instrument. Most recently, this instrument was a bundle of sub-prime mortga
