I try to learn more in depth about topics that interest me. I was reading about the Great Depression, but it is so hard to understand for me what exactly cause it, as I read it, it feels like a mix of fancy words that don’t tell me much (likely due to my lack of knowledge and english not being my 1st language). So, could anyone explain me in simple words what exactly cause the Great Depression?
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It was a bit of a domino effect with a lot of different things playing out. This isn’t the exact order things happened, but it’s a decent overview.
* It started with market fears of a downturn. It was on a massive hot run where stocks kept going up in value. This was being propped up by debt. People would essentially take out loans to buy stocks to take part in the rising values.
* Fearing a potential recession after the hot streak, some of the stocks were sold to pay off said debt before things turned. This caused a dip in the market
* The dip triggered a panic and more people sold, crashing the market.
* People got stuck with loans they could no longer pay due to loss stock values
* banks tightened lending, hurting the market more
* Confidence in banks and the market tanked among the public, causing bank runs as people withdrew money before banks ran out. Many banks closed.
* Federal Reserve raised interest rates due to the gold standard, which limited lending even more, which tanked things even more.
* People stopped spending, unemployment skyrockets.
* Gold standard caused problems with foreign trade as countries kept bumping up interest rates in order to maintain their gold standards, but that caused less spending, more market trouble, more unemployment, etc.
* And then to top things off the US midwest (farm country) got hit with a long drought, which when combined with bad farmland practices caused a dust bowl and a reduction in the food supply.
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