July 25, 2026 • 9 mins
There were many factors that led to the depth and length of the Great Depression, but some of these mistakes are being repeated today. Learn what historians and economists are saying we should watch out for in this classic-but-relevant episode of BrainStuff, based on this article: https://history.howstuffworks.com/american-history/great-depression.htm
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Speaker 1 (00:01):
Welcome to Brainstuff, a production of iHeartRadio.
Speaker 2 (00:06):
Hey brain Stuff, Lauren Bogelbaum here with a classic episode
from our archives, But this one is about the factors
that led to the Great Depression and why economists are
concerned that a similar storm could happen again. The episode
originally published in June of twenty nineteen, during Trump's first presidency.
So a couple examples that we use refer specifically to
(00:29):
that time, but lots of them are still very relevant today.
So I thought it would be a good one to revisit.
Speaker 1 (00:37):
Hey Brain Stuff, Lauren vogel Bomb here.
Speaker 2 (00:39):
If you didn't live through the Great Depression that started
in the late nineteen twenties and lasted until the beginning
of World War Two, it's hard to imagine just how
rough many ordinary Americans had it.
Speaker 1 (00:48):
At the depression's peak in.
Speaker 2 (00:49):
Nineteen thirty three, the nation's gross domestic product had been
cut roughly in half, and nearly one in four American
workers was unemployed since they didn't have money to pay
their mortgages. The fore club rate more than doubled, and
people who lost their homes found themselves erecting cardboard and
scrap wood shacks and living in camps known as Hooverville's
on the edge of towns and cities, named after President
Herbert Hoover, whom many blamed for the depression. In an
(01:12):
interview published by the Federal Reserve Bank of Saint Louis
in two thousand and seven, two men who survived the
depression describe how people around them often were so desperate
for food that they eagerly rooted through garbage bins at
markets for discarded vegetables and spoiled chicken carcasses. Even after
Franklin Roosevelt's New Deal program eased some of the deprivation,
the nation's battered economy continued to struggle right up until
(01:34):
the war brought a massive surge in government spending and
created jobs at defense plans for those who didn't go
off to fight overseas. But why did the Great Depression happen?
And could it ever happen again? The Depression's causes have
been a long time subject of debate by historians and economists,
though there seems to be a consensus that the economic
disaster was the result of multiple factors, some of which
(01:54):
led to the event, while others worsened or prolonged it,
and while the nation's economy, the financial system, and government
regulation have changed considerably since the nineteen twenties and thirties,
experts warned that were still not immune to some of
the same risks that contributed to the catastrophe. Worse yet,
some mistakes of that era are now being repeated. At
the top of the list is income inequality. We spoke
(02:16):
with Robert S. McElvane, a history professor at Millsaps College
in Mississippi and author of The Great Depression America nineteen
twenty nine to nineteen forty one. He says that the
US shifted during the nineteen twenties to an economy heavily
dependent upon consumption of mass produced goods ranging from automobiles
to radios. While sales of those products drove up profits
for factory owners and retailers, most American workers' wages grew
(02:39):
much more slowly. Eventually, he notes, people didn't have enough
money to buy more things and keep the economy going.
Businesses tried to cope by extending consumer credit and allowing
people to gradually pay off their purchases, but they didn't
have enough income to keep buying new stuff as well.
In the summer of nineteen twenty nine, To avoid having
inventory pile up, factories started cut out back on production
(03:00):
and laying off workers. Those workers then couldn't buy things,
which meant even more products piled up. That started the
economy on a downward spiral that contributed to a four
day stock market crash in late October of nineteen twenty nine,
which erased a quarter of the value of the Dow
Jones industrial average, wiping out investors and severely damaging public confidence.
(03:21):
Circa nineteen twenty's, income inequality was exacerbated by a series
of tax cuts pushed through Congress by Secretary of the
Treasury Andrew W. Mellon, ostensibly to stimulate the economy. As
one of the world's richest men, Melon personally benefited from
the cuts more than practically all the taxpayers in the
state of Nebraska. As one political opponent of the bill
pointed out ninety years later, income inequality is growing, and
(03:44):
it's a threat to an economy which depends upon personal
consumption of two thirds of its economic output. And Congress
in twenty seventeen passed a massive tax cut package which
most Americans see themselves as not benefiting from. In addition
to income inequality, there was a lot of an investment
speculation going on. There's a difference between investing and speculating,
(04:04):
which Investipedia defines as putting your money into high risk
investments in hopes of making a killing. But in the
nineteen twenties, when everything seemed to be booming, investors often
were a bit too trusting. We also spoke with Todd Noupe,
a professor of economics and business at Cornell College in
Mount Vernon, Iowa.
Speaker 1 (04:22):
He said many people think of.
Speaker 2 (04:24):
The dust bowl or the stock market crash as the
approximate cause of the Great Depression, but in reality it
was caused by the same factors that have caused financial
crises throughout history in the.
Speaker 1 (04:33):
US and elsewhere. Debt financed speculation.
Speaker 2 (04:37):
In other words, when people find it too easy to
borrow other people's money to speculate on risky ventures, stocks, bond,
subprime housing, etc. Then people risk too much and prices boom,
only to eventually bust decades later. Unfortunately, were still vulnerable
to that psychological flaw. Noop said, markets are prone to
thinking that this time it's different, only to find out
(04:58):
again and again that it is usually not. In the
nineteen twenties, the United States was also dealing with some
bad Federal Reserve policy. Today, we're accustomed to thinking of
the Federal Reserve the nation central bank, as the guardian
of the economy. That's because its board could use monetary
policy control of the supply of money and credit, to
stimulate the economy when it needs a boost, or to
(05:19):
put on the brakes when inflation is starting to creep upward.
But in a two thousand and four lecture, former FED
Chairman Ben Bernanke detailed his theory that ninety years ago,
the FED dropped the ball with policy blunders that helped
cause and prolong the Great Depression. Starting in nineteen twenty eight,
the FED, hoping to put the brakes on Wall Street
speculators who were investing borrowed money, started raising interest rates.
(05:41):
That policy succeeded a little too well, as evidenced by
the stock market's catastrophic drop in October of nineteen twenty nine.
Speaker 1 (05:48):
But then, even after.
Speaker 2 (05:50):
The stock market collapsed, the FED kept increasing interest rates.
The reason was that the US, like many other countries,
was on the gold standard, meaning that the dollar was
redeemable in and pegged to its value when panicked investors
started trading their dollars for gold, the FED moved to
thwart them, Bernanki explained in his speech. To stabilize the dollar,
(06:10):
the Fed once again raised interest rates sharply, on the
view that currency speculators would be less willing to liquidate
dollar assets if they could earn a higher rate of
return on them. But the high interest rates made it
tough for businesses to borrow to weather the hard times,
and many went bankrupt as a result. At the same time,
according to Bernanki, the FED also didn't do enough to
protect the nation's banks, leading depositors to out their savings
(06:32):
and hoard the cash, further worsening the economic crisis. The
US wasn't the only country with such problems. We also
spoke with Nathaniel Klein, an assistant professor of economics at
the University of Redlands and an expert on economic history.
He said the gold standard helped things along by limiting
the policy response of nations around the world. Things like
lower interest rates and government deficit spending were made much
(06:54):
more difficult.
Speaker 1 (06:56):
In addition, while.
Speaker 2 (06:56):
Great Britain provided global economic leadership before World War I, one,
after the war, the US essentially refused to lead despite
being the new center of the world economy. Fortunately, this
is one area where policymakers learned their lesson, Klein said.
In the end, countries dropped the gold standard and many
engaged in deficit spending and monetary policy, and the US
(07:18):
established its leadership under the Breton Woods Agreement. That nineteen
forty four pact created the World Bank and the International
Monetary Fund, as well as eliminating the gold standard internationally.
On the other hand, as a candidate, Donald Trump said
that bringing back the gold standard quote would be very
hard to do, but boy would it be wonderful. As president,
(07:39):
he considered nominating to the FED Board. Hermann Kine, who
wrote in twenty twelve in The Wall Street Journal that
the dollars should be redefined as quote, a fixed quantity
of gold, though in a recent interview came backed away
from that position, and Stephen Moore, another past gold standard advocate,
told CNN that he now favored pegging the currency to
a quote whole basket of commodities. Both later withdrew consideration
(08:00):
in the face of political opposition. One of the other
big factors that led to the depression was trade wars
the Smoot Hawley Act, which was written in early nineteen
twenty nine when the economy was still going strong, but
became law after the Wall Street Crash raised US tariffs
by an average of sixteen percent. The idea was to
keep other countries from hurting US manufacturers by flooding the
(08:21):
market with lower priced products, but when those countries responded
by imposing their own tariffs, the result was a ruinous
global decline in trade that deepened and lengthened the Great Depression.
That bit of history worries many people today due to
President Trump's fondness for imposing tariffs in an effort to
protect US industries. So many of the factors that contributed
(08:41):
to the Great Depression are still risks. Whether they will
ever combine in an economic perfect storm is a harder
question to answer. Today's episode is based on the article
five Causes of the Great Depression? Could It Happen Again?
On has Stufforkstone? Written by Patrick J. Higer. Brain Stuff
(09:02):
is a production of iHeartRadio in partnership with HowStuffWorks dot
Com and is produced by Tyler Klang. Four more podcasts
from Myheartradio, visit the iHeartRadio app, Apple Podcasts or wherever
you listen to your favorite shows,
Welcome to Brainstuff, a production of iHeartRadio.
Speaker 2 (00:06):
Hey brain Stuff, Lauren Bogelbaum here with a classic episode
from our archives, But this one is about the factors
that led to the Great Depression and why economists are
concerned that a similar storm could happen again. The episode
originally published in June of twenty nineteen, during Trump's first presidency.
So a couple examples that we use refer specifically to
(00:29):
that time, but lots of them are still very relevant today.
So I thought it would be a good one to revisit.
Speaker 1 (00:37):
Hey Brain Stuff, Lauren vogel Bomb here.
Speaker 2 (00:39):
If you didn't live through the Great Depression that started
in the late nineteen twenties and lasted until the beginning
of World War Two, it's hard to imagine just how
rough many ordinary Americans had it.
Speaker 1 (00:48):
At the depression's peak in.
Speaker 2 (00:49):
Nineteen thirty three, the nation's gross domestic product had been
cut roughly in half, and nearly one in four American
workers was unemployed since they didn't have money to pay
their mortgages. The fore club rate more than doubled, and
people who lost their homes found themselves erecting cardboard and
scrap wood shacks and living in camps known as Hooverville's
on the edge of towns and cities, named after President
Herbert Hoover, whom many blamed for the depression. In an
(01:12):
interview published by the Federal Reserve Bank of Saint Louis
in two thousand and seven, two men who survived the
depression describe how people around them often were so desperate
for food that they eagerly rooted through garbage bins at
markets for discarded vegetables and spoiled chicken carcasses. Even after
Franklin Roosevelt's New Deal program eased some of the deprivation,
the nation's battered economy continued to struggle right up until
(01:34):
the war brought a massive surge in government spending and
created jobs at defense plans for those who didn't go
off to fight overseas. But why did the Great Depression happen?
And could it ever happen again? The Depression's causes have
been a long time subject of debate by historians and economists,
though there seems to be a consensus that the economic
disaster was the result of multiple factors, some of which
(01:54):
led to the event, while others worsened or prolonged it,
and while the nation's economy, the financial system, and government
regulation have changed considerably since the nineteen twenties and thirties,
experts warned that were still not immune to some of
the same risks that contributed to the catastrophe. Worse yet,
some mistakes of that era are now being repeated. At
the top of the list is income inequality. We spoke
(02:16):
with Robert S. McElvane, a history professor at Millsaps College
in Mississippi and author of The Great Depression America nineteen
twenty nine to nineteen forty one. He says that the
US shifted during the nineteen twenties to an economy heavily
dependent upon consumption of mass produced goods ranging from automobiles
to radios. While sales of those products drove up profits
for factory owners and retailers, most American workers' wages grew
(02:39):
much more slowly. Eventually, he notes, people didn't have enough
money to buy more things and keep the economy going.
Businesses tried to cope by extending consumer credit and allowing
people to gradually pay off their purchases, but they didn't
have enough income to keep buying new stuff as well.
In the summer of nineteen twenty nine, To avoid having
inventory pile up, factories started cut out back on production
(03:00):
and laying off workers. Those workers then couldn't buy things,
which meant even more products piled up. That started the
economy on a downward spiral that contributed to a four
day stock market crash in late October of nineteen twenty nine,
which erased a quarter of the value of the Dow
Jones industrial average, wiping out investors and severely damaging public confidence.
(03:21):
Circa nineteen twenty's, income inequality was exacerbated by a series
of tax cuts pushed through Congress by Secretary of the
Treasury Andrew W. Mellon, ostensibly to stimulate the economy. As
one of the world's richest men, Melon personally benefited from
the cuts more than practically all the taxpayers in the
state of Nebraska. As one political opponent of the bill
pointed out ninety years later, income inequality is growing, and
(03:44):
it's a threat to an economy which depends upon personal
consumption of two thirds of its economic output. And Congress
in twenty seventeen passed a massive tax cut package which
most Americans see themselves as not benefiting from. In addition
to income inequality, there was a lot of an investment
speculation going on. There's a difference between investing and speculating,
(04:04):
which Investipedia defines as putting your money into high risk
investments in hopes of making a killing. But in the
nineteen twenties, when everything seemed to be booming, investors often
were a bit too trusting. We also spoke with Todd Noupe,
a professor of economics and business at Cornell College in
Mount Vernon, Iowa.
Speaker 1 (04:22):
He said many people think of.
Speaker 2 (04:24):
The dust bowl or the stock market crash as the
approximate cause of the Great Depression, but in reality it
was caused by the same factors that have caused financial
crises throughout history in the.
Speaker 1 (04:33):
US and elsewhere. Debt financed speculation.
Speaker 2 (04:37):
In other words, when people find it too easy to
borrow other people's money to speculate on risky ventures, stocks, bond,
subprime housing, etc. Then people risk too much and prices boom,
only to eventually bust decades later. Unfortunately, were still vulnerable
to that psychological flaw. Noop said, markets are prone to
thinking that this time it's different, only to find out
(04:58):
again and again that it is usually not. In the
nineteen twenties, the United States was also dealing with some
bad Federal Reserve policy. Today, we're accustomed to thinking of
the Federal Reserve the nation central bank, as the guardian
of the economy. That's because its board could use monetary
policy control of the supply of money and credit, to
stimulate the economy when it needs a boost, or to
(05:19):
put on the brakes when inflation is starting to creep upward.
But in a two thousand and four lecture, former FED
Chairman Ben Bernanke detailed his theory that ninety years ago,
the FED dropped the ball with policy blunders that helped
cause and prolong the Great Depression. Starting in nineteen twenty eight,
the FED, hoping to put the brakes on Wall Street
speculators who were investing borrowed money, started raising interest rates.
(05:41):
That policy succeeded a little too well, as evidenced by
the stock market's catastrophic drop in October of nineteen twenty nine.
Speaker 1 (05:48):
But then, even after.
Speaker 2 (05:50):
The stock market collapsed, the FED kept increasing interest rates.
The reason was that the US, like many other countries,
was on the gold standard, meaning that the dollar was
redeemable in and pegged to its value when panicked investors
started trading their dollars for gold, the FED moved to
thwart them, Bernanki explained in his speech. To stabilize the dollar,
(06:10):
the Fed once again raised interest rates sharply, on the
view that currency speculators would be less willing to liquidate
dollar assets if they could earn a higher rate of
return on them. But the high interest rates made it
tough for businesses to borrow to weather the hard times,
and many went bankrupt as a result. At the same time,
according to Bernanki, the FED also didn't do enough to
protect the nation's banks, leading depositors to out their savings
(06:32):
and hoard the cash, further worsening the economic crisis. The
US wasn't the only country with such problems. We also
spoke with Nathaniel Klein, an assistant professor of economics at
the University of Redlands and an expert on economic history.
He said the gold standard helped things along by limiting
the policy response of nations around the world. Things like
lower interest rates and government deficit spending were made much
(06:54):
more difficult.
Speaker 1 (06:56):
In addition, while.
Speaker 2 (06:56):
Great Britain provided global economic leadership before World War I, one,
after the war, the US essentially refused to lead despite
being the new center of the world economy. Fortunately, this
is one area where policymakers learned their lesson, Klein said.
In the end, countries dropped the gold standard and many
engaged in deficit spending and monetary policy, and the US
(07:18):
established its leadership under the Breton Woods Agreement. That nineteen
forty four pact created the World Bank and the International
Monetary Fund, as well as eliminating the gold standard internationally.
On the other hand, as a candidate, Donald Trump said
that bringing back the gold standard quote would be very
hard to do, but boy would it be wonderful. As president,
(07:39):
he considered nominating to the FED Board. Hermann Kine, who
wrote in twenty twelve in The Wall Street Journal that
the dollars should be redefined as quote, a fixed quantity
of gold, though in a recent interview came backed away
from that position, and Stephen Moore, another past gold standard advocate,
told CNN that he now favored pegging the currency to
a quote whole basket of commodities. Both later withdrew consideration
(08:00):
in the face of political opposition. One of the other
big factors that led to the depression was trade wars
the Smoot Hawley Act, which was written in early nineteen
twenty nine when the economy was still going strong, but
became law after the Wall Street Crash raised US tariffs
by an average of sixteen percent. The idea was to
keep other countries from hurting US manufacturers by flooding the
(08:21):
market with lower priced products, but when those countries responded
by imposing their own tariffs, the result was a ruinous
global decline in trade that deepened and lengthened the Great Depression.
That bit of history worries many people today due to
President Trump's fondness for imposing tariffs in an effort to
protect US industries. So many of the factors that contributed
(08:41):
to the Great Depression are still risks. Whether they will
ever combine in an economic perfect storm is a harder
question to answer. Today's episode is based on the article
five Causes of the Great Depression? Could It Happen Again?
On has Stufforkstone? Written by Patrick J. Higer. Brain Stuff
(09:02):
is a production of iHeartRadio in partnership with HowStuffWorks dot
Com and is produced by Tyler Klang. Four more podcasts
from Myheartradio, visit the iHeartRadio app, Apple Podcasts or wherever
you listen to your favorite shows,
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Host
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