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Reasons for the Great Depression

What happened during this time period was that there was an oversupply of goods. It wasn't that the goods did not want to be bought it was the fact that the majority of the nation's population could not afford the goods, while the rich were happy with just spending a small portion of their income to buy these goods because they were overproduced. Because of this imbalance, the economy could not remain on an even level causing it to lose millions of dollars.
             Another major factor of the cause of the Great Depression was bank failures. When the market fell, brokers called in loans that could not be paid back. The number of failed banks increased as desperate bankers called in loans in which the borrowers did not have the time or money to pay the banks back. Banks began to fail as a result of people not paying back the money they had owed to the bank. In fear of losing their money, large amounts of bank customers flooded the banks to withdraw their money. Government guarantees and Federal Reserves banking regulations to prevent these withdrawals in masses were ineffective or just not used at all. This caused the failure of hundreds of banks. Small banks, especially those tied to the agricultural economy were in constant crisis with their customers defaulting on loans because of the sudden rise of interest rates. Small banks were steadily failing throughout this decade. City banks also suffered from structural weaknesses as well making them vulnerable to bankruptcy as well. Even some of the nation's largest banks were investing heavily into the stock market and making risky loans that could easily cause the bank to lose all their money. Banks failures led to the loss of millions of dollars. Banks who had survived, unsure of their economic situation concerned for their own survival stopped being as willing to create new loans. Huge debts became larger because prices and incomes fell 20-50% but the debts remained at the same dollar amount.


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