1930s Great Depression: Why things went wrong

The reasons as to why crises occur are not always clear but more often it constitutes a chain of causes, rather than a single blunder to be at the root. Wall street crash of 1929 is blamed by many to be the igniting factor but the exact cause of Great Depression is still blurry.View on cause vary from people to people. Historians justify share market crash & bank failures to be the reason because of which US plunged into a dark economy. This downturn in US economy knocked down other countries and created a global havoc. But economists believe share market collapse was the indicator rather than the destroyer.

                                      
               (Source: http://www.sharehunter.com/news/tag/1929-wall-street-crash/)

They blame US Federal Reserve for their inaction. They argued that the Federal failed to supply money and bail out banks, especially the New York Bank of United States.This created a domino effect & was spread into series of bank panics and runs.

                                        (Source: http://learnhowtobeprepared.com) 

Milton Friedman & Ben Bernanke also argued that the Great Depression was result of the monetary contraction; the stringent regulation of Federal Reserve Act and the gold standard which limited the issue of notes, as the possession of gold by Federal Reserve were not enough that was required to issue Federal Reserve notes. The government also contributed in stretching the depression, by introduction of Smoot-Hawley Tariff Act, which worsened the situation.  The Act increased tariffs on US imports. This resulted in retaliatory tariffs by other countries and plummet in international trade. Indebtedness and deflation was also held responsible to aggravate the situation.Therefore, the plunge in share trading was backed up by many other contributing factors to smooth its way from recession to a great depression.