Therefore, there was a strong link between the US economy and the rest of the world.
The US downturn soon spread to the rest of the world as America called in loans, Europe couldn't afford to pay back.
In particular, they point to the decision to inflate the US economy to try and help the UK remain on the Gold standard at a rate which was too high.
They argue after this unsustainable credit boom a recession became inevitable.
Long queues of people wanting to withdraw their savings was a common sight.
The authorities appeared unable to stop bank runs and the collapse in confidence in the banking system.They say that because the money supply fell so much an ordinary recession turned into a major deflationary depression.The Austrian school of Economists such as Hayek and Ludwig Von Mises place much of the blame on an unsustainable credit boom in the 1920s.On October 28th (Black Monday), the decline in prices turned into a crash has share prices fell 13%.Panic spread throughout the stock exchange as people sought to unload their shares.It was at a level not seen since the nineteenth century.In the first 10 months of 1930 alone, 744 US banks went bankrupt and savers lost their savings.On Tuesday there was another collapse in prices known as 'Black Tuesday'.Although shares recovered a little in 1930, confidence had evaporated and problems spread to the rest of the financial system.Output fell, unemployment rose causing a negative multiplier effect.In the 1930s, the unemployment received little relief beyond the soup kitchen.