THE GREAT CONTRACTION

Many historians in the United States (and many teachers in US high schools and colleges) still attribute the Great Depression to the following: the breakdown of capitalism; excessive reliance on laissez-faire policies; inequality of wealth; overproduction and stock market speculation. These purported causes led to the implementation of the New Deal: well-intended, but ultimately ineffective, policies that actually prolonged the duration of the depression. A retrospective analysis of the actions taken by the Federal Reserve, in fact, demonstrate that the Great Depression was caused, in large part, by a massive contraction of the money supply.