Actpulsa is partly correct. There are many, many factors...
Of course the economic liberals will turn to Rothbard and Mises to explain away what was ultimately a failure of wealth distribution attributed to unregulated markets.
The truth is, Keynesian models and the war saved this country, and failure after failure of attempts to get the private sector to help in both England and the U.S. failed... it was the massive government spending that eventually boosted us to stability.
Eccles, in his memoirs, said famously:
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
Of course, Eccles himself is a biased source... but it was he who placed the blame on the Federal Reserve himself, in his memoirs... a sort of self-blame for the allowing the massive firms to gain such advantage in the market. The irony is that his sorrow is the best resource in this regard because his ego, unlike Rothbard, is non-existent. It was a sad apologetic tone, and one that sheds light on the real causes of the Depression, without political agenda, or face saving.
