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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What usually causes these crashes is bad debt. People in those days borrowed money to buy shares. The shares went up and up, until suddenly people started to think that the market had peaked and then they all started to sell, so the shares collapsed. Then the people who had borrowed money couldn’t pay it back, which is a financial disaster both for them and the people they borrowed money from.
After that, instead of wild speculation and debt, they went too far in the opposite direction: no-one was willing to risk lending or investing money. They just hoarded what they could. Banks and businesses were going out of business. People lost their jobs. The government lost tax revenue. All these things are a vicious cycle – I lose my job so I can’t afford to buy the things you’re selling so your shop goes out of business and other people lose their jobs and the government can’t afford to help…
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