The Great Depression: Timeline, Causes & Impact

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  • 0:06 Causes of Great Depression
  • 0:45 Background
  • 1:45 Risky Financial Practices
  • 2:52 Depression
  • 4:45 Aftermath
  • 5:34 Lesson Summary
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Lesson Transcript
Instructor: Christopher Sailus

Chris has an M.A. in history and taught university and high school history.

In this lesson, we explore the Great Depression and the economic trends and practices that caused the greatest economic meltdown in the history of the world.

Causes of the Great Depression

Rarely in history does an event come along that affects the entire world. Sure, there are big wars and big movements, like WWI or the rise of Marxism, but usually you can still find relatively secluded countries that are barely affected by these events. Usually it takes something massive from nature - like a volcanic eruption that spews billions of tons of Earth-cooling particulates into the air - for an event to have a truly global impact. One of the few times man-made events have had such a profound impact on the entire western world was the Wall Street collapse of 1929 and the ensuing Great Depression of the 1930s.


Prior to the Great Depression and the Wall Street collapse, the United States experienced one of the most prosperous times in the nation's history. The 1920s - nicknamed the Roaring 20s - was a time of economic success and a relaxing of social codes throughout the country. Women experienced increased liberties, like finally achieving the right to vote (also known as suffrage) and the ability to express and enjoy themselves in the public sphere. This latter freedom was symbolized effectively by the flapper-style dress that you saw all over the place if you watched the recent adaptation of The Great Gatsby. Jazz music also became popular across the country, especially in speakeasies - underground bars forced to serve liquor illegally and privately by the era's prohibition of alcohol.

Additionally, the 1920s saw the first major boom in consumer culture. New household amenities, like early refrigerators, electric lighting and automobiles, became must-have items that people were now able to take home immediately and pay for later using the expanding credit industry.

Risky Financial Practices

The heights to which 1920s society climbed worsened the impact of the economic ruin of the following decade. Moreover, much of this prosperity was built upon the shaky legs of risky financial practices, which precipitated the collapse. Indeed, many of the stores offering these new items, like automobiles and refrigerators, offered their own forms of credit at high interest to consumers. When consumers began failing to make payments, the businesses were forced to eat that loss.

In addition, banks were lending money without safeguards against financial crises. Banks were lending out huge sums of money and using customer deposits to do so. Furthermore, they were accepting those same customer deposits without any guarantee that their money would be immediately available to them in the future.

Additionally, stock market speculation played a huge role in precipitating the economic collapse. Speculation on the market by savvy financiers had artificially inflated the prices of large portions of the stock market. Moreover, much of the money being tossed around on the market was increasingly made up of the savings of the growing American middle class.


This economic house of cards came tumbling down on October 28, 1929, a day which was infamously named 'Black Monday.' Several economic indicators pointed to a possible collapse. For example, in 1926, the housing market in Florida collapsed, and land speculators in the state were ruined. In addition, banks that had loaned out too much capital were beginning to fail in 1929, and food prices were beginning to fall, ruining farmers who had produced a vast amount of food to sell at the artificially inflated prices of the 1920s.

When the opening bell rang on Wall Street on October 28, stock prices immediately began to tumble. So many stocks were sold so quickly that day that many traders were forced to work through the night to simply record all the stocks which had been traded, and by the end of the day, the Dow Jones had dropped 13%. The following day, stock prices continued to plummet, dropping another 12%. By November, the market had hit rock bottom, wiping out many middle class investors' life savings.

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