I'm certain I've written an article like this already, but perhaps I have not. I have been “researching” and contemplating “economic science” for many decades, since around the late 1970s. I've had an on and off relationship with economists for many years, pretty much 3 decades. I am just explaining the background to this article – because this article is going to get everyone upset and even angry. To say that I do not have much respect for economists is not really accurate, but there is some truth to this. “Economic science” does not have a formidable reputation, unfortunately. On the other hand, economists do have substantial power and influence. It is sort of a contradiction which is not easily explained.

Wealthy nations are wealthy for what reasons? How is wealth created? These questions are not easily answered, but they can be answered. The answers are persuasive. There is an ultimate reason wealth is created, however. That reason is IQ (Intelligence Quotient). But there is something else which is very powerful, and which is much discussed as a source of wealth-creation. It is the boom/bust cycle. And that's the purpose of this article – to explain that the overriding reason for the Great Depression was the boom/bust cycle.

So here are the four reasons the Great Depression happened. In my view, these are the four important reasons. There may be more, but they do not seem as important to me, and they could be subsumed into the four main ones.

1+ The United States “economy” was moving rapidly from “employment on the farm” to “employment in the factory and in the cities.” Agriculture production could increasingly be done with fewer and fewer workers, so they were discharged from their duties. Where would they then work when this happened? That is the issue. The buildup of factory employment and employment in services was not necessarily keeping up. I need to offer statistics on this to bolster my argument, and I will. But for the purposes of this article I will simply assert that this is fact. So the transition was pretty much an upheaval and it was a shock to most everyone. Productivity in the agricultural sector was rapidly increasing – for a number of reasons, which I will not enumerate here.

2+ After the conclusion of the very bloody and destructive Civil War in the United States, Americans realized that a nightmare had come to an end, and there was a considerable degree of relief and indeed enthusiasm for life. Much of the South was destroyed.

“The Civil War caused over $1.4 billion in physical damage, primarily in the South. Cities like Charleston, Atlanta, and Richmond were devastated, and farmland was ruined, with some areas becoming cemeteries or memorials. Environmental damage included deforestation and forest fires. Infrastructure, including railroads and water systems, was deliberately targeted and destroyed. The Union's 'total war' strategy exacerbated this destruction, leading to significant food shortages and the need for extensive post-war Reconstruction.”

“Roughly 2% of the population, an estimated 620,000 men, lost their lives in the line of duty. Taken as a percentage of today's population, the toll would have risen as high as 6 million souls.” [“Some believe the number is as high as 850,000.”]

Slaves were an important input in the American economy. I will not try to quantify this statement, but I know it was considerable. To say that slaves from West Africa, the Bantu people, built the United States of America is not really an exaggeration. Free labor is of course free labor. The cost is not zero, because there are of course costs associated with keeping slaves. Then there is the cost of making sure they do not flee. But I assume these costs were minimal, compared to the financial rewards. Evidence for these assertions is the fact that slaves were widely held even by middle-class Americans. Slaves were not expensive, and many Americans – maybe as many as some 50% of households – in the South owned slaves. I have a very good history of slavery in my library, but it is hidden away because I rebuilt my home in Bodega Bay. I seem to remember that the number of households in the North owning slaves was pretty high, like maybe 20%-30%. One slave, a house slave, in each household, that was the typical situation in the North of the United States.

You can see the argument I'm making. Slavery was a lucrative business and it powered America's economic development. As I said, slaves were widely held, and they were relatively inexpensive. Even relatively affluent middle-class Americans could afford one.

Of course, this is why ending the slavery institution was so costly – in terms of life and property. I have argued over the years that in the decades prior to the Civil War that the American public became increasingly aware that the slavery institution was “unsustainable” – that it was going to collapse, that it was not viable. Yet there was a very bloody war over it. Very interesting. The idea that over 600,000 American men died in this struggle to preserve slavery is pretty much insane. As far I know, this war was more bloody than most European wars. I used to know the numbers, I will have to go on the net and look this up.

I am documenting this because when the Civil War was concluded, and the Union had been preserved, the conditions for a very powerful economic boom were present. The United States was a powerful and wealthy nation, per capita. Reconstruction was affordable and indeed it was undertaken with great enthusiasm and optimism. Economic Boom!

3+ Excessive debt was also an issue. When there is an economic boom, what happens is that most everyone wants to borrow money – to expand their production and make even more money. This is capitalism. This happened in the run-up to the 2008-2009 financial crash in the United States. When ordinary people, ordinary Americans, when illegal immigrants, are making good incomes, money is borrowed and the banks are all too happy to issue the credit – for the interest earned. What happened in the 1920s was almost a perfect illustration of this phenomenon. That's why it is referred to as “the Roaring 20s.” So much wealth was being created it was pretty insane. You heard of F. Scott Fitzgerald's novel The Great Gatsby? Of course you have. You need to read it again.

What is really interesting about this “debt-fueled expansion” is that it rapidly moves to the financial markets. Wall Street was going crazy, to use a hackneyed expression. I do not have the statistics for you, but I remember that it was not uncommon for most sophisticated and affluent Amerian investors to borrow considerable sums to buy stock. Wall Street securities were selling very well, and it might be true that 50% of this financial speculation was supported by debt. That's my guess, I will have to see if I can get the data on that. The Dow Jones Industrial Index was rocketing. Even ordinary Americans were getting involved, and speculating. You know the story about John D. Rockefeller? It's no doubt true.

“In 1928 in New York City, or so the story goes, John D. Rockefeller was having his shoes shined. The shoe shine boy, presumably not knowing who Rockefeller was, started giving him stock tips. J.D. took his shoe shine boy’s advice – but not in the way you’d expect. He decided that if a shoe shine boy – making a penny a shine – was giving stock tips – it was time to get out of the market. He did – and it’s the reason his family was able to stave off the Depression, and continued to be one of the richest in our history.”

It's a great story. It's obvious when the Wall Street markets are reaching a super speculative phase. All feverish speculations end, and this is what happened in 1929 on Wall Street.

4+ The final reason why the Great Depression happened is perhaps the most important, but I really don't want to say that because they are all important – they are all undoubtedly equally important. Yet there is an argument that this reason, the fourth, is the ultimate reason for the Great Depression. Before WW1 the United States was a net debtor nation. I am not going to explain what that means, you can look it up, it is really pretty obvious. America was borrowing a good amount to fuel its economic expansion. Its debt was not excessive, but it was large. It was a healthy amount of debt because growth was taking place, and incomes were rising. I wish I had the numbers for you, I will try to get them. America's net debtor status was serious.

Then WW1 ended. 1914-1918. The United States had financed the Europeans and their battles and war-making. This was a large amount of finance. Again, I do not have the precise numbers, but it was a considerable amount. War in Europe benefited the United States, it brought income in the form of interest. Like I said, it was a large income. I will have to see if I can get the numbers. Net debtor to net creditor in a short period of time. America was indeed becoming very wealthy. Much wealthier than Europe. Particularly Wall Street. Stock market capitalization of Wall Street was likely at least 10 times higher than European stock market capitalization.

So this is my argument for the reason the Great Depression happened. The question we must then ask is whether this is due to repeat. The answer is: of course it will. Today Americans are heavily invested in the stock market. Ordinary people. 401(k) plans. Back in the 1970s, when I was a teenager, affluent Americans did invest in Wall Street securities, but I believe they were much more diversified. They owned a lot of real estate, farmland, art, businesses, and some bonds. They were much more conservative, they did not necessarily adhere to the Warren Buffett investment axioms – be fully invested in the future, in Wall Street securities. For the long haul, avoid buy and sell urges. “Make America Great Again” is pretty much a con. Donald Trump is ignorant, but he is a cunning con man – and a successful one. I mean, he's a successful “businessman.”