What Made It Worse

Several failures piled up at once. The Federal Reserve raised interest rates when it should have lowered them, choking off credit just when the economy needed it. Panicked depositors pulled their money, and bank failures cascaded.

The Smoot-Hawley Tariff Act of 1930 sharply raised import duties on thousands of goods, triggering retaliatory tariffs worldwide. Global trade collapsed, deepening the crisis for every nation.

Worst of all, prevailing economic thinking insisted that governments balance their budgets during a downturn. This austerity drained even more demand from a collapsing economy, turning a bad recession into the worst depression in modern history.