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.
History of the United States
During the 1920s, the nation enjoyed widespread prosperity, albeit with a weakness in agriculture. A financial bubble was fueled by an inflated stock market, which later led to the Stock Market Crash on October 29, 1929. This, along with many other economic factors, triggered a worldwide depression known as the Great Depression. During this time, the United States experienced deflation as prices fell, unemployment soared from 3% in 1929 to 25% in 1933, farm prices fell by half, and manufacturing output plunged by one-third.