The Great Depression was a severe economic downturn that lasted almost 10 years, from late 1929 until about 1939, and affected nearly every country in the world. There is no consensus among economists and historians regarding the exact causes of the Great Depression, but many scholars agree that at least the following four factors played a role:
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Stock market crash of 1929: The stock market crash wiped out a great deal of nominal wealth, and while it had some effect, it was not big enough to have caused the Great Depression on its own.
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Gold standard: The gold standard played a role in the spread of the Great Depression from the United States to other countries. As the United States experienced declining output and deflation, it tended to run a trade surplus with other countries because Americans were buying fewer imported goods, while American exports were relatively cheap.
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Drop in lending and tariffs: In the late 1920s, while the U.S. economy was still expanding, lending by U.S. banks to foreign countries fell, and the Smoot-Hawley Tariff led to the collapse of world trade.
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Banking panics and contracted monetary policies by the Fed: The contraction of the money supply and the failure of banks led to a decrease in investment and consumer spending, which further worsened the economic situation.
Other factors that contributed to the Great Depression include government policies, bank failures and panics, and the collapse of the money supply. The economic troubles of the 1930s were worldwide in scope and effect, and economic instability led to political instability in many parts of the world. The Great Depression caused the United States Government to pull back from major international involvement during the 1930s, but in the long run, it contributed to the emergence of the United States as a world leader thereafter.
