The depression began with a fall in the prices of agricultural commodities: it first occurred in the price of lumber (1928), largely due to Soviet competition for lumber; but the greater disaster came in 1929, with the overproduction of wheat in Canada, and the United States' forced suppression of the price of basic grains in all agricultural origins. Whether in Europe, the Americas or Australia, the agricultural recession was further exacerbated by the financial meltdown, especially in the United States, where a fever of speculation led to a massive withdrawal of capital from Europe, followed by the panic-inducing Wall Street stock market crash of October 1929.In 1931 the French bankers recouped the loans made to the Austrian banks but this was not enough to pay off the debts. This catastrophe bankrupted the system in many countries of Central and Eastern Europe: it led German bankers to defer repayment of their foreign debts in order to protect themselves, and in turn also endangered British bankers who had invested heavily in Germany. The shortage of capital, in all industrialized countries, brought about a sharp reduction in exports and domestic consumption: the absence of markets inevitably led to the closure of factories, and the fewer goods there were, the fewer goods were transported, which inevitably jeopardized the shipping and shipbuilding industries. In all countries, the consequence of the recession was mass unemployment: 13.7 million in the United States, 5.6 million in Germany and 2.8 million in the United Kingdom (the maximum figure for 1932). The Great Depression also had a major impact on Latin America, causing the loss of foreign investment and merchandise exports in a region almost completely dominated by European and American bankers and merchant entrepreneurs.

Causes:

The Great Recession (1929-1933), with a wide variety of business cycle theories in economics, has led to a wide range of opinions and disagreements when analyzing the causes of the Great Depression. [1] Perhaps the best explanation for the cause of the depression is that the decrease in spending by one or a few social groups exceeded the increase in spending by others.In 1929, consumers purchased 72% of the gross national product, businessmen and industrialists invested and consumed 18%, and the various U.S. federal, state, and local governments used slightly less than 10%, with the rest going to exports.

In 1929-1930, spending on the gross national product fell by about $14 billion because investors and consumers reduced their spending by about $15 billion. Government spending increased slightly, but its effect was negligible. The decrease in investment and consumer spending was reflected in increased layoffs and unemployment in the labor market and lower sales and profits in business and industry. Based on the above analysis, it can be seen that the causes of the Great Depression can be determined by identifying the reasons for the decrease in consumer spending and business investment. Through historical analysis, it is clear that in the 1920s there were already a number of unfavorable trends in economic development that were ignored or disregarded at the time. Agriculture, on the other hand, never fully recovered from the post-war depression, and farmers remained poor throughout this period. In addition, the so-called higher wage levels in the industrial sector, many of which were illusory. Within the decade, the application of new machinery crowded out large numbers of workers. For example, in the years 1920-1929, the total value of industrial output increased by almost 50 per cent without an increase in the number of industrial workers, and the number of workers in the transportation industry actually decreased. The largest increase in workers occurred in the service sector, where wages were very low, and which undoubtedly included many skilled workers who had lost their jobs as a result of technological progress. Thus the statistics which indicate a slight increase in wages do not seem to reflect the real situation. Since the workers and peasants are the basic consumers, the economic difficulties encountered by these two groups will certainly have an impact on the consumer goods market.

In these circumstances, the expansion of advertising and the increase in installment credit sales in the 1920s had adverse consequences. Installment credit sales did their best to inflate the consumer goods market. In the years 1924-1929, installment sales increased from about two billion dollars to three and a half billion dollars, which is an astonishingly high rate of growth. Undoubtedly, the use of installment credit increased sales of consumer durables such as automobiles, radios, furniture, and household electrical appliances. However, the spread of installment sales is also indicative of the fact that the market for consumer goods cannot accommodate the large volume of products produced by the industrial sector without an increase in credit. Moreover, from an economic point of view, this method of selling and lending is inherently dangerous; as soon as consumer credit, i.e., installment sales, is cut back, consumer purchases are likely to be reduced. This seems to have happened in 1929. The expansion of industrial production in the twenties was made possible by the huge investment in new plants and equipment. This investment led to the employment of large numbers of workers in construction, machine tool manufacturing, and related sectors such as the steel industry. Consequently, as soon as capital expenditure or investment was reduced, there was mass unemployment of workers in all sectors of production of the means of production. By 1929, the market for consumer goods could not accommodate the increased production of goods, and there was no longer any need to expand plant and equipment. It is estimated, for example, that in 1929 the entire industry of the United States was at work at a rate of only 80 percent. Under these conditions, it is no wonder that investment (in 1958 dollars) fell from $40.4 billion in 1929 to $27.4 billion in 1930, and then to $4.7 billion in 1932. The contraction of investment led to the bankruptcy of productive enterprises and the unemployment of workers. This problem was exacerbated by the decline in housing construction. Housing construction, which had reached its peak in 1925, declined from then on; in 1929 only half a million houses were being built (in 1925 there were about a million), and after 1927 the automobile industry also declined sharply. Unemployment of workers in the production of the means of production leads to a decrease in the sales of consumer goods, which in turn leads to unemployment of workers in the production of consumer goods. Reduced sales of consumer goods, in turn, led to a further contraction of investment, and the increasing interplay between these two sectors drove production ever lower and unemployment ever higher. Even favorable factors such as low taxes and high profits may have contributed to the outbreak of the crisis. It now appears that much of the increased income of the period went to a few individuals or families, as a 1934 Brookings Institution paper examining the economic problems of the 1920s wrote: "The United States has shown a tendency toward an increasingly unequal distribution of income, at least around the turn of the twenties. This means that the incomes of the people increased during this period, while the income levels of the upper classes increased more rapidly. Since the saving portion of their income increased faster than the consumption portion as the higher incomes of the upper classes were realized, there was also a tendency for the great tycoons and their families to invest more and more of their accumulated income as investments." From an economic point of view, the distribution of income in the twenties had a tendency to tighten consumption to increase investment. A review of this period of history suggests that the national economy might have been stabilized with more money in the hands of consumers and less in the hands of investors.The stock market boom of 1929, caused to some extent by bank credit, also reflected an excess of capital that made it unprofitable for capitalists to invest in the purchase of plant and equipment. The prosperity of the 1920s was largely attributable to an abundance of natural resources, growth in industrial and agricultural production, technological advances, increased labor productivity, expanded consumption, and booming foreign trade. However, the poverty of many Americans and certain weaknesses in the national economy led to the onset of the Great Depression. Nevertheless, until the end of the twenties, most Americans were blindly optimistic that prosperity would continue.