Economic Theories: The Causes Of The Great Depression
Inequality and under consumption
Waddill Catchings and William Trufant Foster observed that companies were creating far more supply than what was being demanded. The main cause for this was that consumers did not have sufficient income. This kept continuing uncorrected, and caused a great divide between the rich and the poor. The unending balanced scale of demand and supply was again unbalanced. Stock market crash
The 1929 crash of Wall Street is argued over frequently by historians and economists as whether it was the most important cause of the Great Depression.
Prior to the crash there was a massive economic boom in the stock market. Many a million were investing like anything in stock, with plenty even borrowing money to buy more and more stock. After the crash - people noticed the fall, and the desperate selling started out of panic. Close to 13 million shares were traded in a single day. As everybody started getting more and more desperate to sell his stock, the share prices kept on dropping; which cause the crash to keep on plummeting down till July 1932, when it dropped to an all-time low. This turned out to be a big …show more content…
Prior to the First World War, the International Gold Standard reached an all-time high. The rise in trade bloated up both industrialization and agriculture. The increase of gold in coinage made them look good and quite heavy.
However, the First World War waltzed right in and put everything to a sudden pause. The United Kingdom was compelled to surrender its Gold Standard.
The alteration in the Gold Standard was not the ‘cause’ of the Great Depression as such. But, it did cut down money supply and enlarged the problems like rubbing salt to a wound. Besides, all the other theories mention piled up on top of each other - no surprise why international trade suffered! There are many more theories Great Depression can take.