The Great Depression was caused due to several reasons. Some of them are listed below:
- Agriculture overproduction was a big hand in the problem. As a result, agricultural prices fell drastically. As prices fell, so fell the agricultural incomes. This increased the volume and need of goods in the market. The situation got worse and uncontrollable in the market. Prices fell down even more. Farm produce began to rot due to the lack of buyers and consumers.
- Prosperity in the USA during the 1920s created an opportunity of higher employment and incomes. It further proceeded to a rise in consumption and demands. More investment and more of number employment created tendencies of speculations which led to the Great Depression of 1929 up to the mid-1930s. The stock market crashed heavily in 1929. It created panic and tension among investors and depositors who stopped investing and depositing. Which later resulted and, it created a cycle of depreciation.
- The withdrawal of US loans affected the rest part of the world in many different aspects. In Europe, it showcased to the failure of the major banks and the collapse of major currencies such as the British pound sterling. Some of the banks were shut down when people withdrew all their assets, leaving them unable to invest. Few banks called back loans taken from them at the same dollar rate, in spite of the falling value of the dollar.