The Causes of the 1920 Great Depression

The reason why the recession of the late 1920s in the UD became the Great Depression is a combination of three factors. overly tight monetary policy, overly cautious fiscal policy (espcially under FDR in 1936, when tightening led to another sharp downturn in the US economy), and dramatic recourse to beggar-thy-neighbour policies, including competitive devaluations (as countries went off the gold standard in the 1930s) and increases in trade barriers.

Source: Arvind Subramanian, "How Disgraced Economists Managed to Make Amends" FT, 28/12/2009.