The Great Depression of the 1930s was the largest recession in history and its causes were overproduction of goods and the expansion of unbridled credit by banks.
The American economy was experiencing a period of euphoria during the 1920s. The US had become the world's leading economic powerhouse and was the largest supplier of manufactures to Europe. In this scenario, banks have expanded their credit rampantly to sustain the increase in production. However, production increased in a way that there was not enough consumer market to dispose of the products. The businessmen lost the conditions to pay their loans to the banks and the financial system collapsed.
As a consequence, firms' indebtedness increased, causing defaults and breakdowns of firms and the financial system. This generated a large number of unemployment and deflation - a fall in the price of goods. The Great Depression was only overcome through the New Deal, an economic recovery plan implemented by the Roosevelt government.
