Traditionally, the main cause of an economic disturbance was an agricultural drought. Thus many peasants' revolts of the Middle Ages, and surely before. Even today this is a cause of food shortage in North Korea.
From the 19th century, the causes diversified to, including, currency shortages, shortages of gold bullion (that backed currency), banking panics, economic disturbances in other parts of the world, debt-deflation (as during the Great Depression), embargoes (such as the Arab Oil Embargo), monetary policy, and the industrial inventory cycle. The industrial inventory cycle was notable during the 20th century and is probably the model for what is traditionally thought of as a recession. This is thought to occur when businesses overestimate consumer demand and acquire too much inventory that they cannot sell. They then reduce orders from factories, when in turn lay off workers. This reduction in workers further reduces consumer demand, and the cycle continues until a drop in the price level restores it.
With the deindustrialization of the economy in the late 20th century, the business cycle became less pronounced. Beginning in the 1960s economic expansions began to get longer, although this trend was somewhat hidden by the oil crises. The 1991-2001 economic expansion was the longest in history, to be surpassed only now. The basic reason for this lengthening is (relative) deindustrialization, which has shifted output to the less volatile service sector, where demand is more stable. Of the last 5 recessions, fully 3 of them were caused by the Federal Reserve raising interest rates to get a handle on inflation.
So basically people spend money they don't have and then they don't have any money to buy more things. As a result, people have to try harder to sell things to people who don't have money any more. When people are finally able to sell enough things, people are then able to buy enough things until they buy too much again. The main economic debate between Labour/Democrats/Liberals/SocDems/"Socialists"(real socialists think this all can be avoided by telling everyone exactly how much they should buy and sell and when) and Republicans/Liberals/Conservatives/Tories/Christian Democrats is whether economic conditions are lead by people buying enough things or selling enough things with the respective former and latter believing them. This is based off of observation, the editorial section of newpapers, getting As in elective-level micro and macro econ classes, getting As in American and Modern World History (got a B in Western Civ I because I took it when I was 15) and a 4 year degree of Poly Sigh at a small public university. Probably wrong.
