Causes of the great depression


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Causes leading to the Great Depression

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Causes of the great depression

  1. 1. Post War Economic Boom ► Americans were earning more money than ever in the 1920s. ► Americans made $61 billion in 1922, they made $87 billion by 1929. ► Bought more luxury goods (cars, radios, etc.) ► U.S. stock market was at an all time HIGH! ► 1.1 billion shares traded by the end of 1929.
  2. 2. Causes of the Great Depression Republicans ► Republicans (President Coolidge and Hoover) believed in helping big business  Provided help in offering business tax cuts. ► The goal was profits gained due to lower taxes would “trickle down” and benefit the American worker. ► Result – Businesses become wealthier, workers wages remain low.
  3. 3. Causes of the Great Depression Republicans ► Republicans refused to forgive $11 billion in war debt to European allies. Instead lent them more money and England and France fell deeper and deeper into debt. ► Republicans imposed a high tariff on imported goods. Furthered Europe’s economic decline.
  4. 4. Causes of the Great Depression ► 1. Overproduction ► Consumer demand for goods is high (advertising). ► 1920s witnessed rapid economic growth  New machines in factories decrease production time.  Expansion as manufacturers made/sold new products like cars, radios, and refrigerators ► 1929 - Many consumers lacked the money to buy these goods  Manufacturers soon produced more goods than they could sell
  5. 5. Causes of the Great Depression ► 2. Stock Market Speculation ► Americans tried to use the stock market to “get rich quick” by buying stocks  Drove prices even higher ► Investors bought a company’s stock and sold it for a higher price. Stock becomes artificially inflated. ► By 1929, stock prices TRIPLED since 1920 ► Stock prices were being sold higher than the “Actual” values.
  6. 6. Causes of the Great Depression ► 3. Shaky Banking ► Banks collected money from depositors and invested in businesses  They earned $$$ to pay interests on deposits ► Most banks honest, but some made unsound investments ► Government failed to regulate banking/stock market ► Consumers bought more than they could afford ► Large use of credit purchases made U.S. economy system extremely vulnerable
  7. 7. Causes of the Great Depression ► 4. Restricted International Trade ► Tariffs protected U.S. markets ► This made it hard for producers to sell goods aboard  Countries retaliated by setting their own high tariffs ► President Hoover signed highest tariff in U.S. history ► Shrinking of world trade contributed to the Great Depression
  8. 8. Causes of the Great Depression The Crash ► Analysts warn that constantly rising stock prices could not last for long. ► On “Black Thursday” Oct. 24, 1929, stocks began to move sharply downward  Investors become nervous and begin to sell stock.  No on stepped in to buy any stock to support the fall
  9. 9. Stock Market Crash ► Stock Market crashes on Oct. 29, 1929 “Black Tuesday”, and launched the most devastating depression in U.S. history.  Investors lost $16 billion. ► The “crash” did NOT cause the depression, it was one of many factors.  Personal Response -- A president of a company in NY threw himself off of a ledge when his company’s stock fell from $113 to $4 a share
  10. 10. Causes of the Great Depression Risky Lending Practices ► Republicans laissez-faire (“leave alone”) beliefs allowed the banking industry to engage in risky practices. ► Banks permitted investors to buy stocks on credit. ► When the market crashed, investors could not pay the bank back for the loans. ► By 1932 – 6,000 banks closed.
  11. 11. Causes of the Great Depression ► After “the crash”   Corporations couldn’t raise funds People lost life savings, jobs, unable to pay rent/ mortgage on homes. ►Factories closed due to falling prices and falling demand  No one to buy foreclosed houses  Without a “safety net” – like unemployment insurance – hundreds of thousands of Americans found themselves living on the streets or in makeshift shacks
  12. 12. Photo A Photo B Photo C
  13. 13. Causes of the Great Depression ► Decline in farming industry ► Europe does not need U.S. agricultural products by 1920s. ► Farmers are in debt to bank because they have expanded their farms, equipment, etc. ► Dust Bowl – drought so severe that soil becomes powdery dust. ► “Okies” – farmers who moved out of midand southwest U.S. to escape the drought.
  14. 14. Causes of the Great Depression ► Unequal distribution of wealth ► The rich were getting richer and the poor were getting poorer. ► 60% of U.S. families lived on or below $2,000 a year. ► 1% of Americans possessed 59% of nation’s wealth. ► People could not afford to purchase goods, sales dropped and companies failed.
  15. 15. Diary of 1930s-Assignment ► Imagine you are living in the 1930s.  Based on how people’s lives were affected, write a ¾-1 page diary of what you life would have been like. Look back in your notes if needed. Use historical information & challenges that people struggled and dealt with.  Put in class folder when finished.