I always thought the problem was speculation for profit, in the stock market crash. Everyone was in the stock market, just like today. They had special houses for women so they wouldn't have to go into smoky rooms with all the men to do their trades. Even poor people had money out on stocks.
When the big speculators sold their stocks and things looked like they were collapsing, all the small speculators panicked and sold at a loss. The big speculators then bought the cheap stocks and let the economy rebuild itself, and suddenly had a huge fortune for a song.
The current mortgage crisis was a set 'em up, knock 'em down, along the same lines. Some try to write it off as an epidemic of stupidity among borrowers who signed loans they would not be able to afford. But that would also indicate stupidity among thousands of lenders. Every day the tv is filled with commercials about how important your credit score is if you want to get a loan. Lenders look at your income, stability in your job, savings, tax records, and credit score to 'qualify' you to get a loan, assuring themselves you can pay it back.
But suddenly, all across the nation, they loaned people money with 'adjustable rates' which would suddenly 'balloon' to amounts they could NOT pay back.
They would have to admit to being inept at their business, or knowing exactly what they were doing, and seeing a chance to profit by preying upon borrowers who would not see the illogic of a 'balloon' mortgage.
The initial lender made their money and sold the loans. The secondary lender, buying mortgages in bulk packages, has to admit to ineptitude or predation too. Is there a third option?
They likely will walk away with the real estate assets worth trillions and be able to sell at bargain prices, still at a huge profit, and getting government bailouts and tax writeoffs.
The losers? The little people, individuals who sacrificed, scrimped and saved, whose savings are gone. They've hit us where we live, our homes, the American Dream become the American nightmare. The social implications are complex. People will crowd into homes with relatives, friends, strangers. All manner of conflict will ensue, sexual abuse, elder abuse, poverty, malnutrition. And all the result of, either ineptitude among thousands of lenders, in a sudden epidemic, or predation, a deliberate scam.
The Great Depression was global in scope. You would have to know what went on in the 'global' economy of that day. Was there a shift in the geographic distribution of the industrial revolution, factories shutting down and moving, like today? New products, processes, machines? What were energy demands, supply, and costs in that time?
Weather was a major factor, disrupting the food supply. The dustbowl in America may have been one of many weather disruptions around planet Earth that played a role.
The loss of millions of productive humans due to World War I and the so-called Spanish flu epidemic were also factors leading up to that time. The indiscriminate felling of key members of families, companies, workforces, had to wreak havoc economically. Predators came out of the woodwork to take over assets weakened by loss of leaders.
Consumers quickly settle in and start holding on to what little money they've got, accelerating companies' loss of profits. Companies resist loss of profit and keep prices high. High gas prices now are making people cut back on consumption of gas, conserve home heating and electric costs. The price of foods that demand gasoline to be grown and harvested, processed and delivered are being passed on in higher prices for food and everything that is made with and moves by petroleum.
Good luck.
