The Great Depression was caused by a variety of factors. The first was the lack of diversity in the economy. Growth was very dependant on a limited number of industries, especially automobiles. Because the industries that were booming at the time did not have to be bought so often by consumers, those industrustries’ profits began to decline. From 1926 to 1929, consumer spending fell greatly, particularly in the construction and automobile industries. Although newer industries, including those of petroleum, chemicals, and plastics were rising and positioning themselves to expand amongst consumers, they did not generate enough strength economically to neutralize the decline of the other sectors. The second constituent to the Depression was the maldistribution of wealth that was present at the time. The great wealth gap that existed resulted in an overall weakness in consumer demands. Prior to the depression, over 60% of the population was living under the poverty line, while the richest 1% owned 40% of the nation’s net wealth. The majority of the population could no longer have strong consumer demands, causing the producing …show more content…
Crop prices became too low for farmers to pay off their land, causing it to be mortgaged. They became plagued with debt, while small banks, especially those that were associated with the agricultural economy, remained under constant pressure in the 1920s as their customers continued to fail their monetary legal obligations (default on loans). This caused many small banks to fail. Larger banks were also majorly affected as well; some of the country’s largest and most powerful banks were investing carelessly in the stock market and giving out imprudent loans. After investors began to speculate rashly and buying stocks on margin, the stock market crash after massive sell-offs began, causing all these banks to suffer immense losses that were greater than the amount they could take