Most people attribute the cause of the Great Depression to the stock market crash of 1929. The day the stock market collapsed is known as "Black Tuesday". After the stock market crashed, it led to a decrease in confidence in the economy and in turn created an even deeper depression.
There are several theories about why the stock market collapsed in 1929 all of which have to do with financial regulation and a lack of action on the part of the Federal Reserve System at the time. If the Federal Reserve had properly regulated the process of inflation and deflation, the Great Depression could have been avoided, or at least lessened.
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