Waged had risen relatively little. As well, economic success was not shared by all. The top 5% of the richest Americans received over 33% of all income. Once demand for their prodcuts devlined, business laid off workers contributing to a down
Overproduction of Consumer Goods
Unable to purchase goods
People in economic classes believed they could get rich by "paying the market." People no longer invested their money to share in the profits of a company. They speculated that the price of the stock would go up and that they could sell it for a quick profit. When stock prices dropped, the market collapsed.
Weak Farm Economy
Low interest rated and a belief of both consumers and business that the economic boom was permanent led to increased borrowing and installment buying. This over-indebtedness would result in defaults on loans and bank failures.
Business growth, aided by increased productivity and use of credit, had produced a volume of goods that workers with stagnant wages could not continue to purchase.
Use of Credit
Prosperity of 1920s never reached farmers. Suffered from overproduction, high debt, and low prices since the end of WWI. As the depression continued through the 1930s, severe weather and a long drought added to farmers' difficulties.
Government had complete faith in business and did little to control or regulate it. Congress enacted high tariffs which protected U.S industries, but hurt farmers and international trade. Economists blamed the Federal Reserve for its tight money policies. Without depositors' insurance, people panicked to get their money out of the banks, which caused more bank failures.