5 Causes of the Great Depression

One of the major causes of the Great Depression was the Stock Market Crash. Stockholders lost more than $40 billion dollars. Only 2% of the American families controlled 26% of the wealth. Even though some of the losses were regained, there was just too much damage and America entered the Great Depression. The second major cause was bank failures. 9000 banks failed in 1930. Bank deposits were uninsured and people lost their savings. In addition, surviving banks were not willing to create new loans. The third major cause was reduction in purchases. People stopped purchasing items because of fear of more economic suffering. Due to this fact, there were less items being producing resulting in loss of jobs and accumulation of inventory. The fourth major cause was American Economic Policies with Europe. Because businesses were failing, the government created a tariff to protect American companies. This resulted in high tax for imports resulting in less trade. The last major cause was drought conditions. A drought in the Mississippi Valley meant man could not pay their taxes and debts. Instead, people had to sell their farms and were not able to make profit.