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Causes of the Depression
 

Causes of the Depression

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    Causes of the Depression Causes of the Depression Presentation Transcript

    • The Great Depression
    • Unequal distribution of wealth
      • 2% of people owned 60% of wealth
      • 50% of families lived below poverty level = made less than $1500 per year
      • Most could not afford electricity/furnace heat
      • On average = $10 - $20 per week
      • Unequal balance btwn production & distribution
      • CREDIT and BUYING ON MARGIN
    •  
    • Unequal distribution of corporate power
      • Mergers led to reduced competition.
      • 200 companies owned 50 % of nation’s wealth
      • When one company went bankrupt… huge impact on economy and society
      • 86,000 businesses failed
      • wages were decreased by an average of 60%
      • unemployment rate from 9% to 25%
      • about 15 million jobless
    • Corporations
    • Poor Banking Structure
      • http://www.youtube.com/watch?v=qu2uJWSZkck
    • Poor Banking Structure
      • Small, local banks owned by larger city banks
      • Not backed up or regulated by government
      • Lent out more than they took in
      • larger banks called in loans, smaller banks were forced to give money
      • 9,000 banks went out of business
      • 9 million savings accounts wiped out
      • http://www.youtube.com/watch?v=qu2uJWSZkck
    •  
    • High Tariffs and War Debts
      • European countries hit the depression before U.S.
      • Hawley-Smoot Tariff: placed a high tax on imports to keep Americans buying American products
      • Other countries retaliated
      • Effectively halted international trade
      • Difficult for World War I payments to be made
    •  
    • Overproduction in Industry & Agriculture
      • Farmers purchased new machines with credit during the 1920s to increase their production yield.
      • Laid off workers in the process.
      • Planned to pay off credit debt with “increased” income from “increased” sales
      • Too much of a product = lower price
      • Combined with unemployment
      • Didn’t pay off debt = farms repossessed
    •  
    • Stock Market Crash
      • 1920s: invest in stock market to make money
      • What is stock?
      • Early investors saw dips and sold
      • What if no one buys the stock?
      • October 24 th – people who bought on margin sold
      • JP Morgan & banks tried to stabilize market
      • October 29 th – FEAR led to increased selling
    •