What are the causes of the Great Depression? How did the European states respond to the Great Depression?
The tough thing about this question is that there is no one answer. Historians and political scientists have been trying to discern the cause of the Great Depression since it happened. I will try to give my best interpretation. The 1920’s the period leading up to the Great Depression, was a time of great prosperity, when the Government had little direct influence in the economy (that is compared to today, government influence was always there). At this time stock prices were going up, and nearly everyone was getting into the market. Banks began to loan people money at low rates so they could buy stock, and they would allow them to use the stock they would purchase as collateral for the loans (this is called “buying on margin”) Naturally, when the stock market collapsed, these loans all went into default, and essentially more than 1/4 of the nation’s money supply simply disappeared. Since the money supply constriction meant the money was worth more, the price of everything should have f
