The causes of the Great Depression are numerous and debateable.  However, economists and historians can agree on four causes:

1. Misuse of Credit - Credit, where one borrows money from another (usually a bank), to purchase items and then re-pay that borrowed amount over a set period of time.  Credit was very easy to obtain in the 1920s.  

   • This is widely believed to be the biggest cause of the Depression. A 14 year old tradesman in New York should not get credit to purchase stock. 

2. Buying on Margin (or Margin Buying) - people would purchase stocks with borrowed money (credit).  When the stock decreased in value, the loan could not be repaid and both the bank and the individual lost money. People believed that stocks would never lose their value - it is called overspeculation.  That is a big mistake. 

3. In-Action of the Federal Reserve - The FED did not help banks.  Banks ran out of money and the FED did not increase the money supply, they practiced tight monetary policy - where the FED keeps the money supply low.  Banks could not lend money to those who needed it and they closed. 

4. Increased taxes - Hoover passed 1) the Hawley-Smoot Tariff that essentially increased taxes on imported goods and in 1932, he passed the Revenue Act that doubled the personal income tax.