The Great Depression was caused by a combination of several factors that created a fragile post-war world economy.

First, agricultural overproduction remained a persistent problem. As agricultural prices slumped and incomes declined, farmers tried to expand production and bring larger volumes to the market to maintain their overall income. This worsened the glut in the market, pushing prices down even further. Farm produce rotted due to lack of buyers.

Second, many countries financed their investments through loans from the US during the mid-1920s. While it was easy to raise loans when conditions were good, US overseas lenders panicked at the first sign of trouble. In the first half of 1928, this led to withdrawal of credit.

Third, the US banking system collapsed as the depression deepened. Banks slashed domestic lending and called back loans. Farms could not sell harvests, households were ruined, and businesses collapsed. Many households could not repay their borrowings and were forced to give up their homes, cars, and other consumer durables.

Finally, the consumerist prosperity of the 1920s proved unsustainable. The housing and consumer boom, fuelled by easy loans, created a cycle of higher employment and incomes. However, this prosperity was "too good to last," and by 1929, the world plunged into a depression it had never experienced before.