Monetary and Nonmonetary Explanations for the Great Depression
The Great Depression was a worldwide event that kicked off with the stock market crash of October 29, 1929. The general causes for the crash are understood to be the accumulation of easy credit based on an overly optimistic financial outlook throughout the 1920s. This trend resulted in risky credit decisions on the part of banks and other lenders, including loaning money for marginal investments. The rising debt across the board created market instability and eventually led to the crash. The primary economic theories have reached a rough consensus that world governments were too slow to react to the crash and subsequent business failures, leaving lenders holding the bag, often with no way to liquefy what assets they had. It is generally asserted that governments should have quickly lowered interest rates, lowered taxes, and injected cash into the...