<P> Economists such as Waddill Catchings, William Trufant Foster, Rexford Tugwell, Adolph Berle (and later John Kenneth Galbraith), popularized a theory that had some influence on Franklin D. Roosevelt . This theory held that the economy produced more goods than consumers could purchase, because the consumers did not have enough income . According to this view, in the 1920s wages had increased at a lower rate than productivity growth, which had been high . Most of the benefit of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases . Thus workers did not have enough income to absorb the large amount of capacity that had been added . </P> <P> According to this view, the root cause of the Great Depression was a global overinvestment while the level of wages and earnings from independent businesses fell short of creating enough purchasing power . It was argued that government should intervene by an increased taxation of the rich to help make income more equal . With the increased revenue the government could create public works to increase employment and' kick start' the economy . In the USA the economic policies had been quite the opposite until 1932 . The Revenue Act of 1932 and public works programmes introduced in Hoover's last year as president and taken up by Roosevelt, created some redistribution of purchasing power . </P> <P> The stock market crash made it evident that banking systems Americans were relying on were not dependable . Americans looked towards insubstantial banking units for their own liquidity supply . As the economy began to fail, these banks were no longer able to support those who depended on their assets--they did not hold as much power as the larger banks . During the depression, "three waves of bank failures shook the economy ." The first wave came just when the economy was heading in the direction of recovery at the end of 1930 and the beginning of 1931 . The second wave of bank failures occurred "after the Federal Reserve System raised the rediscount rate to staunch an outflow of gold" around the end of 1931 . The last wave, which began in the middle of 1932, was the worst and most devastating, continuing "almost to the point of a total breakdown of the banking system in the winter of 1932--1933 ." The reserve banks led the United States into an even deeper depression between 1931 and 1933, due to their failure to appreciate and put to use the powers they withheld--capable of creating money--as well as the "inappropriate monetary policies pursued by them during these years". </P> <P> According to the gold standard theory of the Depression, the Depression was largely caused by the decision of most western nations after World War I to return to the gold standard at the pre-war gold price . Monetary policy, according to this view, was thereby put into a deflationary setting that would over the next decade slowly grind away at the health of many European economies . </P>

What was the cause of the great depression in 1930