An evaluation of the reasons for the economic crisis of 1929-33

Overproduction and Underconsumption

The 1920s experienced significant overproduction in agriculture and industry. With supply exceeding demand, prices fell dramatically.
Farmers and manufacturers were left with large amounts of unsold goods, leading to financial problems.
While production increased, wages did not. This economic disparity meant that decade’s prosperity was not shared equally.
The prosperity of the 1920s had led many Americans to buy unnecessary goods on credit. This resulted in high levels of debt and underconsumption as many could not afford to continue buying goods.

Stock Market Crash

The Wall Street Crash of 1929 was a significant trigger of the economic crisis, leading to a collapse in share prices.
Many investors and banks lost substantial amounts of money, leading to a declining faith in the economy.
The resultant financial panic and loss of confidence rippled throughout the American economy and then globally.

Bank Failures

In the early 1930s, thousands of banks across the USA failed. When they failed, savers lost their money, which worsened the crisis.
The mass withdrawal of savings led to bank runs which created more instability in the banking system.
Fear of further bank failures led people to hoard money, reducing spending and investment.

Protectionism

The passing of the Smoot-Hawley Tariff Act in 1930 by the American government erected high import tariffs on foreign goods.
The intention was to protect American farmers and manufacturers, but it worsened the situation as global trade declined drastically due to retaliatory tariffs from other countries.
This reduced international trade and plunged the world deeper into economic depression.

Monetary Policy

The Federal Reserve made major errors that led to a contraction in the money supply and further exacerbated the economic downfall.
They increased interest rates to try and curb stock market speculation, and later failed to act as lender of last resort during bank runs, leading to an even bigger crisis.
These actions by the Federal Reserve and the lack of government intervention turned a normal recession into the Great Depression.

Each of these elements played a role in the economic crisis of 1929-33. To provide a solid answer in an assessment, you need to not only list these factors but also analyse and link them to the question where relevant, supporting your arguments with specific examples and evidence. Consider how these factors interplayed and collectively led to the Great Depression.