One of the most discussed topics in economics is the cause of the Great Depression of the 1930s. It is impossible to pinpoint the exact cause or causes of depression, but many attempts have been made. The stock market crash, banking panics, rising global tariffs, allegiance to the gold standard, and reduced consumption were to blame. Each of these reasons likely played a role in the Great Depression. This article will examine the Austrian school of thought regarding the causes of the Great Depression and look at how the same mistakes are made today. According to the Austrians, every depression follows a “boom-bust” cycle caused by multiple errors in the economy. decision making. Rothbard explains these common characteristics as a “set of errors.” The “boom” of a depression is a period of wasted investment. This is caused by banks lending money at too high a rate. As newly acquired funds pour into businesses, businesses believe that the supply of funds for investment has greatly increased and the interest rate will fall. Businesses invest this money at a higher rate in the capital goods market because they have been “tricked” into believing that there has been an increase in consumer savings. Soon the inflation caused by this bank will spill over into the economy in the form of higher wages. Consumers, who have not actually increased their preference for saving, rush to consumer goods. Investments in capital goods by businesses turn out to be wasteful. The depression period is the economy correcting the mistakes of the boom. The increase in capital goods will be abandoned or used in other ways. The economy will adapt to the needs of consumers. The period of depression is necessary to restore the economy...... middle of paper ......sion will only cause greater damage. This can be seen in the period leading up to the Great Depression. The Roaring '20s seemed to be a time of unlimited prosperity thanks to the Federal Reserve continuing to lend money to banks. Instead of realizing the problem, the Fed continued to lend money until the market crashed. During the Depression, Hoover (as well as his successors) tried to heal the economy by putting more money into it. The Austrians believe that this has caused further problems and that those in power should have practiced laissez-faire economic policies by ending all inflationary actions. These same mistakes are still made today, as explained by the example of the real estate bubble. Until more policy makers realize the nature of the Austrian boom-bust cycle, the same mistakes will be made and the same consequences will be felt..