What were Some of the Causes of the Great DepressionWritten by pallavikhera
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A phase which was faced by the economies of all the countries, that affected the world before the World War II is the Great depression. This article would speak about the various causes that led to the cause of this downturn of the economy, in the form of the great depression. This Great Depression that affected the entire world, including the rich and the poor countries was started from U.S. Multiple causes led to this Great Depression, and during the depression, there was a huge unemployment problem, which people faced for almost 8-10 years. The personal income, income taxes by the government etc came down drastically during the Great Depression.
The Great Depression started in the year 1929 and saw its effects in various places of the globe up to 1940’s. The various reasons that were stated for the cause of the Great Depression are mentioned below: -
The Most common causes quoted by the historians and the economists for the cause of the Great Depression in because of the structural weakness of the financial markets. This also led to the fall of the stock markets, which in turn affected the stocks of all the countries. The back drop for this collective drop of share markets are the actions of the US federal reserve. The Federal Reserve of US contracted the supply of money and this triggered the market sentiments to sell the shares. This in turn led to the fall of the markets across the globe that affected the economy of the United States.
Considering the second opinion offered by the historians, the Great Depression was caused mainly because of the negligence by the government. Another assumption is that the Great Depression was caused due to the negligence in the free markets. The negligence by the government was by, not controlling the money supply, regulation of interest rates and failing to curtail the failures by banks in the recollection of the money.
Taking these assumptions into consideration, two conclusions can be derived. The first conclusion states that, a person who is inclined to the state with larger role would consider the cause to be due to the negligence of the free markets. The second conclusion states that, a person inclined to the state with a smaller role would consider that the negligence of the state that caused the Great Depression. There are other arguments which states that the mistake in policy formation, also led to the Great Depression. These are the few causes that resulted in the cause of the Great Depression. Every economy today tries to avoid the occurrence of the great depression again with the right precautionary measures.