Explain What Caused The Great Depression
The focus of Friedman and Schwartz on the U.S. experience (by design, of course) raised other questions about their monetary explanation of the Depression. As I have mentioned, the Great Depression was a worldwide phenomenon, not confined to the United States. Indeed, some economies, such as that of Germany, began to decline before 1929. Although few countries escaped the Depression entirely, the severity of the episode varied widely across countries. The timing of recovery also varied considerably, with some countries beginning their recovery as early as 1931 or 1932, whereas others remained in the depths of depression as late as 1935 or 1936. How does Friedman and Schwartz's monetary thesis explain the worldwide nature of the onset of the Depression, and the differences in severity and timing observed in different countries?
explain what caused the great depression
If declines in the money supply induced by adherence to the gold standard were a principal reason for economic depression, then countries leaving gold earlier should have been able to avoid the worst of the Depression and begin an earlier process of recovery. The evidence strongly supports this implication. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which stubbornly remained on gold. As Friedman and Schwartz noted in their book, countries such as China--which used a silver standard rather than a gold standard--avoided the Depression almost entirely. The finding that the time at which a country left the gold standard is the key determinant of the severity of its depression and the timing of its recovery has been shown to hold for literally dozens of countries, including developing countries. This intriguing result not only provides additional evidence for the importance of monetary factors in the Depression, it also explains why the timing of recovery from the Depression differed across countries.
Depression is one of the most common mental disorders in the U.S. Current research suggests that depression is caused by a combination of genetic, biological, environmental, and psychological factors.
All parts of the nation were faced with the worst economic depression in history in 1929. Iowans suffered along with the rest of the nation. This video from Iowa Public Television explains causes and effects of the stock market crash of 1929.
With unemployment also comes a number of other issues; employees often receive health benefits from their employer and losing a job may mean losing affordable health care. These impacts compound existing racial inequity in health care access as the Hispanic or Latino population is also disproportionately likely to contract COVID-19. Las Vegas coronavirus rates per 1,000 residents are much higher among Hispanic or Latino people than white people. This helps explain why data through mid-January 2021 indicate that one out of twelve Hispanic or Latino Las Vegans have had COVID-19, while only one in twenty white residents have.25 On an age-adjusted basis, death rates for Hispanic residents in Nevada are nearly three times as great as that of white residents.26
If someone has a family history of depression, are they at very high risk? If someone has a parent or sibling with major depression, that person probably has a 2 or 3 times greater risk of developing depression compared with the average person (or around 20-30% instead of 10%).
While you can see from the above discussion that recessions and depressions are serious business, some economists have been known to suggest that there is another more casual way to explain the difference between a recession and a depression (recall that I began this answer with a promise of a joke):