Causes of the Great Depression
Business cycles are a normal part of living in a world of inexact balances between supply and demand. What turns a usually mild and short recession or "ordinary" business cycle into a great depression is a subject of debate and concern. Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets, or largely a failure on the part of governments to prevent widespread bank failures and the resulting panics and reduction in the money supply. Those who believe in a large role for governments in the... [continues]
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