Causes of the Great Depression
Second, there are the monetarists, who believe that the Great Depression started as an ordinary recession, but that significant policy mistakes by monetary authorities (especially the Federal Reserve) caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression. Related to this explanation are those who point to debt deflation causing those who borrow to owe ever more in real terms.
Causes of the Great Depression
Economists such as John Maynard Keynes and Milton Friedman suggested that the do-nothing policy prescription which resulted from the liquidationist theory contributed to deepening the Great Depression. With the rhetoric of ridicule Keynes tried to discredit the liquidationist view in presenting Hayek, Robbins and Schumpeter as