Question

What led to the Great Depression?

Answer 1

was it from people investing to much in stock market?

Answer 2

There were other factors such as declining demand for certain commodities that added to the economic slowdown leading to it, but stock market speculation was also a big part of it. During the Roaring 20s, people got carried away with dreams of making big money on Wall Street when it seemed the market kept going up. Millions borrowed huge sums of cash to dump into the market, treating it like a casino, right before it collapsed when people began to panic on seeing signs that it wasn't as healthy as they thought it was.

So, more and more people started to bail out of the market, sending it downwards, and resulting in millions of people losing everything they had because they bet it wouldn't fall. They couldn't pay back their loans. Banks also lost big as people lost confidence in the economy and starting pulling their money out leading to a huge number of banks collapsing.

Without banks loaning money to customers that need it, spending slows down. When spending slows, so does the economy. Without a healthy economy, businesses have a harder time making money to stay afloat and pay their workers. They could ask for a bank loan, unless the bank they did business with collapsed. And so on.

It's a vicious circle of circumstances that created the Great Depression as one event after another wrecked the economy, but the stock market panic was one of the biggest factors that touched many others.

Answer 3

ask Bernanke
this is supposedly his forte.