The Main Causes Of The Great Depression

There is not one specific cause of the Great Depression, but rather, there were multiple different causes of the Great Depression, all of which are identifiable in the years leading into the Depression. One such action that helped create the Great Depression would be the way citizens and banks handled their stocks. At the time, investing in the stock market was believed to be a terrific idea that many people participated in. This was due to the fact that it was believed that people had nothing to lose by investing their money in stocks, and that they would always be rewarded with some sort of profit in the end. However, this was troublesome and risky for many reasons, but mainly due to the fact that in order to purchase the stocks, people took out loans and then payed back those loans using the profits they gained from their stocks.
As stock prices began to fall, banks began losing their depositors money, so in order to regain the money they had lost, they began calling in loans that had been taken out by stock holders.
However, since people had been using loans as a way to invest in the stock market, this created a vicious cycle where people began selling off their stocks to pay off their loans. As a result, stock prices continued to fall, and the situation took a turn for the worst after the American public discovered that banks were beginning to no longer be able to back their deposits. Many Americans grew panicked and worried, and rushed to their banks to withdraw their deposits as fast as possible. As deposits were withdrawn from banks at a fast rate and stocks continued to fall, banks began to have no money to return to depositors, which caused the banks to fail and
collapse.
Lastly, another contributing factor to the Great Depression was the economic situation in Europe. Germany in particular was struggling economically after the first World War and was heavily pressured under conditions given to them after the war had ended. Germany struggled to repay the loans the United States had given them, so as stocks began to fall and the United States began to call in loans, the loans were nearly impossible to pay off and the United States was forced to cut off the loans it was supplying to Europe. Also the period leading into the Depression, the rest of Europe was attempting to rebuild their war torn nations from nothing, due to the fact that the war had been fought on their soil and had destroyed their countries. As a result, the United States was supporting Europe by using loans to supply them with food and money, and once the stock market crashed in October of 1929, the Depression took root and began to affect the entire world.