Causes leading to the Great Depression

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.

3. 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.

4. 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.

5. 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

6. 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.

8. 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

9. 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

10. 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

11. 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

14. 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.

15. 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

16. Photo A
Photo B
Photo C

17. 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.

20. 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.

21. 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.