Common Misconception

• Many people believe that the stock market crash of 1929 was the single event that caused the Great Depression, the longest and most devastating economic collapse in modern history. Although the two events are related, the crash itself did not cause the depression. Rather, the Great Depression resulted from a series of economic factors that had their roots in the 1920s. These included American consumer debt, depressed conditions in agriculture, a speculative "bubble" in the stock market, and international economic problems.
  
  

Rising Debt

• The 1920s saw an increase in the extension of credit, which enabled consumers to purchase goods now and pay for them later. This came at a time when America's manufacturing output increased dramatically. Credit gave American workers, whose wages increased only about 8 percent during the 1920s, the means to purchase many of the new goods and services being produced. By 1929, however, many consumers had accumulated so much debt that they had to reduce their consumption.
  
  

Agricultural Woes

• Depressed conditions struck America's farmers years before they hit the rest of the nation. During World War I, American farms increased their output to meet high global demand for agricultural products. During the 1920s, as European farms returned to production after years of war, the global agricultural market had an overabundance of goods, which sent prices plummeting. As a consequence, farmers struggled to sell their products for a profit.
  
  

Stock Speculation

• While workers' incomes rose only slightly during the 1920s, the wealthiest Americans saw their incomes rise dramatically, which fueled rapid growth in the stock market. By the late 1920s, stock prices rose far beyond their actual worth. Investors continued to pay inflated prices, believing the shares would continue to soar, netting them a profit. The crash of 1929 demonstrated otherwise.
  
  

International Problems

• American banks lent heavily to European borrowers, as Europe struggled to pay war debts. At the same time, the United States levied high tariffs on imported goods. This made for an unsustainable combination. If foreign countries could not sell their goods in the U.S., they would not have the money to repay loans to American banks. This made for an unstable world banking system.