The causes of the Great Depression - which was a global downturn - are much debated. But most economic historians blame the Federal Reserve's policies in the boom times of the 20's, The Fed's actions after the stock market crash, and its policies during the 1930's.
The Federal Reserve controls America's monetary policy - NOT the Executive or Legislative branches of government. Monetary policy was NOT thought to be in error until Keynes'
The General Theory came out in 1936:
The Great Depression
$this->bbcode_second_pass_quote('Wiki', '[')b]Keynesian models
In the early 1930s, before John Maynard Keynes wrote
The General Theory, he was advocating public works programs and deficits as a way to get the British economy out of the Depression. Although Keynes never mentions fiscal policy in
The General Theory, and instead advocates the need to socialize investments, Keynes ushered in more of a theoretical revolution than a policy one. His basic idea was simple: to keep people fully employed, governments have to run deficits when the economy is slowing because the private sector will not invest enough to increase production and reverse the recession.
As the Depression wore on, Roosevelt tried public works, farm subsidies, and other devices to restart the economy, but never completely gave up trying to balance the budget. According to the Keynesians, he needed to spend much more money; they were unable to say how much more.
The issue of monetary policy was further complicated by the gold standard in America (and the desire to return to it in Britain) which prevented the Fed from acting with unparalleled flexibility.
But all of this is really quite academic because today's circumstances are much different than the 1930's. If the Great Depression is still being debated by the most learned professors in the land, one can only hope that the Federal Reserve wonks can get a clue about what needs to happen this time around.
I bet that whoever is reading our economic entrails today can see the letters E-N-E-R-G-Y forming in the offal.