Throughout the years many historians have postulated what the cause of the Great Depression. In the beginning people thought that the only reason why the depression occurred was because of the stock market crash of 1929. The mass hysteria that ensued was presumed to have then prolonged the Depression longer than necessary. Although as the years have come and gone new theories have come to light regarding what led up to the Depression and what caused it to go on for so long. In a scholarly journal written by Paul Evans, Iftekhar Hasan, and Ellis W. Tallman. They argued that aggressive open market operations or the departure from the gold standard could have avoided the aggregate collapse in 1929-39. The the Gold Standard was a system where the value of the currency was backed by gold. By detaching from the Gold Standard the value of money decreased exponentially. Also the open market operations sold large amounts of government securities which destabilized the government. The authors …show more content…
They made it quite clear that this conclusion was not a hard fact. They elaborated by stating how new evidence, theories, and ideas are coming forward all the time, in fact almost every day. It was refreshing to see how the authors could admit how their theories in time could be built upon just as they have built on the theories that came before theirs. The next journal was written by Edward C. Prescott. He believed that the Depressions main causes could also be attributed to the banking crises, deflation, a decrease in the money supply and a corresponding increase in the interest rate. As explained in the above article with the switch from the Gold Standard and the massive deflation in the value of the dollar, people tried to put all of their money into cash which caused the banking crisis. Which caused the decrease in the money in money supply which caused the government to raise the interest