Question

What were the possible causes of the Great Depression? To what extent could a stock market crash of the intensity of 1929 occur again in America?

Answer 1

Answer:

overproduction of goods and the expansion of unbridled credit by banks.

Explanation:

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.

Currently, the Federal Reserve has regulatory mechanisms that aim to reduce the risk of unbridled expansion of bank credit, such as the collection of the compulsory deposit and monetary policy. However, it is not possible to say that the risk is non-existent. We live in a special moment where technology has positive impacts, but can also cause negative havoc. For example, virtual currencies, if not well regulated, can cause a new crisis.