What economic conditions and events brought on the depression?

Throughout the 1930 the USA suffered a severe economic depression known as Great Depression . The Great Depression continues to be a challenge to the scholars as they still have not agreed on the exact causes of the crisis . The American depression seemed largely to be the product of number of causes . A decade of stagnation in agriculture , flattening sales in the automobile and housing markets , the piratical abuses on Wall Street , the woes of the anarchic banking system - these were surely problems enough

The downturn of 1929 had been caused by the

massive bank failures and the stock market crash . In the space of a few days in October 1929 values on the New York Stock Exchange abruptly collapsed , wiping out the heady optimism of the great bull market ' of 1928-1929 (Himmelberg , 4 ) The 1920 's was the time when the enterprises and factories were mostly purchased on credit . Moreover , people widely used mortgages and credit purchases of furniture , cars and other expensive products . This encouraged spending but on the other hand increased commercial and consumer debt . The price deflation that followed put people and companies that had debts in serious predicament , which led to reduction of spending and consequently of demand for new goods . The decrease in demand was a direct reason of the drop in production and failure of enterprises and factories . The result was the mass dismissals and general unemployment rate increased over 25 . People without job could not afford covering their debts and banks that financed most of the debts found themselves in great troubles . The debtors ' defaults on their debts were only the part of banks ' problem . The depositors who now did not feel save keeping money in banks to withdraw their funds . The usual Federal Reserve Banking Regulations designed to cope with such situations were not effective neither government guarantees helped . The banking system failed . While the debt was increasing , the drop in prices and incomes at 20-50 worsened the situation as the debts remained the same in dollar amount . It is estimated that 9 ,000 banks failed during that decade (Himmelberg , 29 the rest of survived banks reconsidered their policy of lending and concentrated on building up own reserves . Such banks behavior only intensified the deflationary pressures . The situation came to a standstill and made its contribution to turning economic recession into a great depression

Another event that most probably contributed to depression was the Hawley-Smoot Tariff Act of 1930 . It brought about considerable decrease of international trade by increasing US tariffs . While the U .S exporting dealt mostly with commodities of farming business such as lumber , wheat , tobacco and cotton the collapse in international trading put the agriculture and farmers into stagnation . The result was that depression successfully spread worldwide . Franklin Roosevelt tried to regulated economy through the New Deal , which was intended to give more power to farmers and lift taxes on corporate profits . While some of the regulations of New Deal were acknowledged as unconstitutional and abolished , the others...