What were the main causes of the 1929 economy depression in USA??

Answer 1

NOT primarily the stock market crash (yes, the crash was bad but the fraction of Americans who lost significant wealth was small). So what were the main causes?

Tight monetary policy - the Federal Reserve failed to provide sufficient liquidity (i.e. loans or bond purchases) to the banking system. This turned a relatively minor disruption in to a major problem (and this was the cause of the bank runs).

Tight fiscal policy - a desire to balance the federal budget (typical of that time) led to a combination of higher taxes and less government spending. This had a contractionary effect on the economy.

Smoot-Hawley tarrif (and other tariffs) led to a dramatic reduction in trade and therefore a reduction in economic activity

Answer 2

During the late 1920's the US stock market entered a speculative bubble comparable in many ways the dot com boom of the 1990's (it was even largely technologically drive, with radio and aviation companies taking the place of Internet startups). In 1929 the market corrected, producing the single largest loss in history, although the crash of 1987 approached it in percentage terms.
According to most modern economic thought, the Great Depression proper did not begin until several months later, as a string of panic-driven governmental interventions in the broader economy begun under Hoover and accelerated by FDR (particularly the Smoot-Hawley tariff, and later, the New Deal) introduced massive new uncertainties and rigidity into business environment. As New Deal initiatives were struck down by the Supreme Court and legislative attention turned to the mounting crisis in Europe by the later 30's, matters stabilized - at least until the onset of the war.

Answer 3

The depression was not just in the US but involved all the economies in the industrialized world so explanations that are specific to US are not adequate. Currencies were on the gold standard so there was a tendency toward deflation and banking failures were a common element in many countries as well as the high tariffs after 1930 caused the sharp decline in international trade which worsen the what was a recession and turn it into a depression,

Answer 4

Purchasing stocks with 10% down.
When stocks dropped , most could not come up with the cash to cover the margins, which created further drops, then a crash.
The feds changed all that since then.

When that happened, banks lost assets, and the run on banks with people withdrawing cash, added to the woes. As you may know, banks were ordered to close by the feds, but the losses were not FDIC insured as they are today, up to 100k. So, depositors lost their savings.
Creditors tanked when consumers could not pay their debts.
A chain reaction set in.

Answer 5

Stock market crash. People start to worry and everyone tried to pull out their money at the same time. The banks did not have the cash demanded. People and businesses went bankrupt and there was no money circulating in the economy.

Answer 6

Additionally, contraction and expansion of money supply worsened the situation.