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The Great Depression (1929-1933)

After nearly a decade of optimism and prosperity, the United States was thrown into despair on Black Tuesday, October 29, 1929, the day the stock market crashedand the official beginning of the Great Depression. As stock prices plummeted with no hope of recovery, panic struck. Masses and masses of people tried to sell their stock, but no one was buying. Thestock market, which had appeared to be the surest way to become rich, quickly became the path to bankruptcy.
And yet, the Stock Market Crash was just the beginning. Since many banks had also investedlarge portions of their clients' savings in the stock market, these banks were forced to close when the stock market crashed. Seeing a few banks close caused another panic across the country. Afraidthey would lose their own savings, people rushed to banks that were still open to withdraw their money. This massive withdrawal of cash caused additional banks to close. Since there was no way for abank's clients to recover any of their savings once the bank had closed, those who didn't reach the bank in time also became bankrupt.
There were multiple causes for the first downturn in 1929. Theseinclude the structural weaknesses and specific events that turned it into a major depression and the manner in which the downturn spread from country to country. In relation to the 1929 downturn,historians emphasize structural factors like major bank failures and the stock market crash. In contrast, economists (such as Barry Eichengreen, Milton Friedman and Peter Temin) point to monetary factorssuch as actions by the US Federal Reserve that contracted the money supply, as well as Britain's decision to return to the Gold Standard at pre–World War I parities.
Recessions and business cycles arethought to be a normal part of living in a world of inexact balances between supply and demand. What turns a normal recession or 'ordinary' business cycle into a depression is a subject of much...