WRONG: The 1929 Crash Didn't Cause the Depression

Everything you think about 1929 is half wrong.

The story goes that on Black Tuesday, the stock market crashed, and America fell into the Great Depression. The crash was real. But it did not happen the way you were taught.

Most investors never touched the market. So why did everyone suffer? Because over the next four years, something far worse spread across the country. Wave after wave of bank panics. By 1933, roughly nine thousand US banks had failed, nearly a third of them all.

When a bank collapsed, ordinary people lost their life savings overnight. The nation's money supply shrank by about a third. And the Federal Reserve, the one body meant to stop the bleeding, largely stood by. Economists like Milton Friedman argued that failure turned a recession into a catastrophe.

The crash lit the match. But it was the banking collapse, and the response to it, that let the fire burn for a decade. Historians still debate the exact weight of each cause.

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