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Credit was a major cause of the Great Depression. In the 1920's, people in America (e.g. Canada and the USA) had a great economy due to the war and therefore people were more willing to spend money. Many people though, didn't make a lot of money and so they bought things using credit. People that should not have been able to afford things like houses and cars suddenly had them. Banks were willing to loan money because of the great state of the economy, and people were happy to take them. To make matters even worse, people noticed that the Stock Market was the best way to get rich off of other people's money. In other words, working people would take a loan from a bank and invest it in the market. Before September of 1929, they were basically guaranteed to make money. They would then pay off the loan and have a small profit to show. But when the Stock Market crashed, people lost billions of dollars. They didn't even use their money in the first place, and so now they had to pay off a large loan with money they didn't have. Banks, of course, began to foreclose homes and reposes things. For some banks, though, they couldn't collect because the people had nothing, and so the people and banks went bankrupt.
To summerize, credit was a major cause of the Great Depression.
Gerson Bahringer
Wiki User
∙ 9y agoCredit was a major cause of the Great Depression. In the 1920's, people in America (e.g. Canada and the USA) had a great economy due to the war and therefore people were more willing to spend money. Many people though, didn't make a lot of money and so they bought things using credit. People that should not have been able to afford things like houses and cars suddenly had them. Banks were willing to loan money because of the great state of the economy, and people were happy to take them. To make matters even worse, people noticed that the Stock Market was the best way to get rich off of other people's money. In other words, working people would take a loan from a bank and invest it in the market. Before September of 1929, they were basically guaranteed to make money. They would then pay off the loan and have a small profit to show. But when the stock market crashed, people lost billions of dollars. They didn't even use their money in the first place, and so now they had to pay off a large loan with money they didn't have. Banks, of course, began to foreclose homes and reposes things. For some banks, though, they couldn't collect because the people had nothing, and so the people and banks went bankrupt.
To summerize, credit was a major cause of the Great Depression.
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