A well-reasoned (I would have used the adjective balanced if it hadn't been utterly voided of its meaning thanks to a cable and satellite news channel that shall remain nameless) New York Times article deals with just that timely question:
The possible causes of the ensuing stock market plunge [the 1937 crash] and steep contraction in the economy provide fodder for just about everyone in the current political debate. Republicans can point to the Roosevelt tax increases. Democrats have the spending reductions, which coincides with Mr. McElvaine’s view. “It appears clear to me that the cause was policies put into effect in 1936-37, mainly cutting spending when F.D.R. believed his re-election was secured,” he said.
The Nobel-prize winning economist Milton Friedman blamed the Fed and the contraction in the money supply in his epic “Monetary History of the U.S.” And the stock market itself may have been a culprit, falling so steeply that it wiped out the wealth effect of rising prices, undermined confidence and brought back painful memories of the crash. But taken together, they suggest that policy makers moved too quickly to withdraw government support for the economy.
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