1. Causes of the Great
Depression
By: Brian Dorsey
Largo High School
2. Cause #1:
Speculation
As business profits increased in the 1920's, many Americans thought
they could make a lot of money by buying shares in successful
companies
Some investors even bought stock on margin. Paying as little as
10% of the stock's price.*
When the market started to decline, creditors who loaned money
demanded the loans be repaid
When the stock market crashed in 1929, those who invested in
successful companies lost everything and those who borrowed
money could not repay their loans
*A buyer might pay as little as 10% of the stock's price and borrow the other
90 percent from a broker. The results was that someone with just $1,000
could borrow $9,000 and buy $10,000 worth of shares.
3. Cause #2:
Banking Crisis
When people are prospering, they deposit their money they do not need at that
time into banks. Banks will take that money and lend it out to business to earn
interest.
In the 1920's many banks loaned money to stockbrokers, who loaned the money
to investors.
When the stock market crashed, investors could not repay the stockbrokers and
stockbrokers could not repay the banks
Banks stopped loaning money to business and people
After the stock market crashed, banks began to close. In fear of their bank
closing, individuals lined up to withdraw their money from banks.
4. Cause #3:
Overproduction
In the 1920's, most factories were using assembly-line methods of mass
production.
As a result, they were able to make more goods more quickly.
Companies welcomed increase production because it means increased income.
By the end of the 1920's there were more products being produced than people
could afford to buy.
5. Cause #4:
Underconsumption
By 1929, the buying spree of the 1920's had come to an end
Many American found themselves in debt and were unwilling to unable
to borrow more
Farming felt this first, when after World War I, their markets
disappeared.*
Many farmers went into debt, they had difficulties repaying loans. Many
losing their farms to banks.
Many companies were forced to layoff workers because of the lack of
demand. Other companies went out of business
*During World War I, farmers had prospered by supplying food for American
soldiers and people of war-torn Europe. When the war ended those markets
disappeared. Consumption of farm products decreased, causing prices to drop.
6. Meanwhile, in the rest of
the world…
• Germany was struggling economically because it
not only had to rebuild, but also pay reparations
• Failure to repay loans in one country affected
other countries because of international trade
• The Great Depression happened worldwide, not
just in the US
• In the economic and social crisis, people turned
to strong leaders
