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Causes of the Depression
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Causes of the Depression

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  • 1. The Great Depression
  • 2. 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
  • 3.  
  • 4. 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
  • 5. Corporations
  • 6. Poor Banking Structure
    • http://www.youtube.com/watch?v=qu2uJWSZkck
  • 7. 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
  • 8.  
  • 9. 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
  • 10.  
  • 11. 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
  • 12.  
  • 13. 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
  • 14.  

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