causes of the great depression

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Post War Economic Boom Post War Economic Boom Americans were earning more money than Americans were earning more money than ever in the 1920s. ever in the 1920s. Americans made $61 billion in 1922, Americans made $61 billion in 1922, they made $87 billion by 1929. they made $87 billion by 1929. Bought more luxury goods (cars, radios, Bought more luxury goods (cars, radios, etc.) etc.) U.S. stock market was at an all time U.S. stock market was at an all time HIGH! HIGH! 1.1 billion shares traded by the end of 1.1 billion shares traded by the end of 1929. 1929.

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Causes leading to the Great Depression

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Page 1: Causes of the great depression

Post War Economic BoomPost War Economic Boom

►Americans were earning more money than Americans were earning more money than ever in the 1920s.ever in the 1920s.

►Americans made $61 billion in 1922, they Americans made $61 billion in 1922, they made $87 billion by 1929.made $87 billion by 1929.

►Bought more luxury goods (cars, radios, Bought more luxury goods (cars, radios, etc.)etc.)

►U.S. stock market was at an all time HIGH!U.S. stock market was at an all time HIGH!►1.1 billion shares traded by the end of 1.1 billion shares traded by the end of

1929.1929.

Page 2: Causes of the great depression
Page 3: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

Republicans Republicans ►Republicans (President Coolidge and Republicans (President Coolidge and

Hoover) believed in helping big business Hoover) believed in helping big business Provided help in offering business tax cuts.Provided help in offering business tax cuts.

►The goal was profits gained due to lower The goal was profits gained due to lower taxes would “trickle down” and benefit taxes would “trickle down” and benefit the American worker.the American worker.

►Result – Businesses become wealthier, Result – Businesses become wealthier, workers wages remain low.workers wages remain low.

Page 4: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

Republicans Republicans ►Republicans refused to forgive $11 Republicans refused to forgive $11

billion in war debt to European allies. billion in war debt to European allies. Instead lent them more money and Instead lent them more money and England and France fell deeper and England and France fell deeper and deeper into debt.deeper into debt.

►Republicans imposed a high tariff on Republicans imposed a high tariff on imported goods. Furthered Europe’s imported goods. Furthered Europe’s economic decline.economic decline.

Page 5: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression►1. Overproduction1. Overproduction

►Consumer demand for goods is high Consumer demand for goods is high (advertising).(advertising).

►1920s witnessed rapid economic growth1920s witnessed rapid economic growth New machines in factories decrease production New machines in factories decrease production

time.time. Expansion as manufacturers made/sold new Expansion as manufacturers made/sold new

products like cars, radios, and refrigeratorsproducts like cars, radios, and refrigerators

►1929 - Many consumers lacked the money to 1929 - Many consumers lacked the money to buy these goodsbuy these goods Manufacturers soon produced more goods than Manufacturers soon produced more goods than

they could sellthey could sell

Page 6: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

►2. Stock Market Speculation 2. Stock Market Speculation ►Americans tried to use the stock market Americans tried to use the stock market

to “get rich quick” by buying stocksto “get rich quick” by buying stocks Drove prices even higherDrove prices even higher

► Investors bought a company’s stock and Investors bought a company’s stock and sold it for a higher price. Stock becomes sold it for a higher price. Stock becomes artificially inflated.artificially inflated.

►By 1929, stock prices TRIPLED since 1920By 1929, stock prices TRIPLED since 1920►Stock prices were being sold higher than Stock prices were being sold higher than

the “Actual” values.the “Actual” values.

Page 7: Causes of the great depression
Page 8: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

►3. Shaky Banking3. Shaky Banking► Banks collected money from depositors and Banks collected money from depositors and

invested in businessesinvested in businesses They earned $$$ to pay interests on depositsThey earned $$$ to pay interests on deposits

►Most banks honest, but some made unsound Most banks honest, but some made unsound investmentsinvestments

►Government failed to regulate banking/stock Government failed to regulate banking/stock marketmarket

► Consumers bought more than they could Consumers bought more than they could affordafford

► Large use of credit purchases made U.S. Large use of credit purchases made U.S. economy system extremely vulnerableeconomy system extremely vulnerable

Page 9: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

►4. Restricted International Trade4. Restricted International Trade►Tariffs protected U.S. marketsTariffs protected U.S. markets►This made it hard for producers to sell This made it hard for producers to sell

goods aboardgoods aboard Countries retaliated by setting their own Countries retaliated by setting their own

high tariffshigh tariffs

►President Hoover signed highest tariff President Hoover signed highest tariff in U.S. historyin U.S. history

►Shrinking of world trade contributed to Shrinking of world trade contributed to the Great Depressionthe Great Depression

Page 10: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

The CrashThe Crash►Analysts warn that constantly rising Analysts warn that constantly rising

stock prices could not last for long.stock prices could not last for long.►On “Black Thursday” On “Black Thursday” Oct. 24, 1929Oct. 24, 1929, ,

stocks began to move sharply stocks began to move sharply downwarddownward Investors become nervous and begin Investors become nervous and begin

to sell stock.to sell stock. No on stepped in to buy any stock to No on stepped in to buy any stock to

support the fallsupport the fall

Page 11: Causes of the great depression

Stock Market CrashStock Market Crash

►Stock Market crashes on Stock Market crashes on Oct. 29, 1929Oct. 29, 1929 “Black Tuesday”, and launched the “Black Tuesday”, and launched the most devastating depression in U.S. most devastating depression in U.S. history. history. Investors lost $16 billion.Investors lost $16 billion.

►The “crash” did NOT cause the The “crash” did NOT cause the depression, it was one of many factors.depression, it was one of many factors. Personal Response -- A president of a Personal Response -- A president of a

company in NY threw himself off of a ledge company in NY threw himself off of a ledge when his company’s stock fell from $113 when his company’s stock fell from $113 to $4 a shareto $4 a share

Page 12: Causes of the great depression
Page 13: Causes of the great depression
Page 14: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

Risky Lending PracticesRisky Lending Practices►Republicans laissez-faire (“leave Republicans laissez-faire (“leave

alone”) beliefs allowed the banking alone”) beliefs allowed the banking industry to engage in risky practices.industry to engage in risky practices.

►Banks permitted investors to buy Banks permitted investors to buy stocks on credit.stocks on credit.

►When the market crashed, investors When the market crashed, investors could not pay the bank back for the could not pay the bank back for the loans.loans.

►By 1932 – 6,000 banks closed.By 1932 – 6,000 banks closed.

Page 15: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression►After “the crash”After “the crash”

Corporations couldn’t raise fundsCorporations couldn’t raise funds People lost life savings, jobs, unable to People lost life savings, jobs, unable to

pay rent/ mortgage on homes.pay rent/ mortgage on homes.►Factories closed due to falling prices and Factories closed due to falling prices and

falling demandfalling demand

No one to buy foreclosed housesNo one to buy foreclosed houses Without a “safety net” – like Without a “safety net” – like

unemployment insurance – hundreds of unemployment insurance – hundreds of thousands of Americans found themselves thousands of Americans found themselves living on the streets or in makeshift living on the streets or in makeshift shacksshacks

Page 16: Causes of the great depression

Photo A

Photo B

Photo C

Page 17: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

►Decline in farming industryDecline in farming industry►Europe does not need U.S. agricultural Europe does not need U.S. agricultural

products by 1920s.products by 1920s.►Farmers are in debt to bank because they Farmers are in debt to bank because they

have expanded their farms, equipment, have expanded their farms, equipment, etc. etc.

►Dust Bowl – drought so severe that soil Dust Bowl – drought so severe that soil becomes powdery dust.becomes powdery dust.

►““Okies” – farmers who moved out of mid- Okies” – farmers who moved out of mid- and southwest U.S. to escape the drought.and southwest U.S. to escape the drought.

Page 18: Causes of the great depression
Page 19: Causes of the great depression
Page 20: Causes of the great depression

Causes of the Great Causes of the Great DepressionDepression

►Unequal distribution of wealthUnequal distribution of wealth►The rich were getting richer and the poor The rich were getting richer and the poor

were getting poorer.were getting poorer.►60% of U.S. families lived on or below 60% of U.S. families lived on or below

$2,000 a year.$2,000 a year.►1% of Americans possessed 59% of 1% of Americans possessed 59% of

nation’s wealth.nation’s wealth.►People could not afford to purchase People could not afford to purchase

goods, sales dropped and companies goods, sales dropped and companies failed.failed.

Page 21: Causes of the great depression

Diary of 1930s-Diary of 1930s-AssignmentAssignment

► Imagine you are living in the 1930s.Imagine you are living in the 1930s. Based on how people’s lives were Based on how people’s lives were

affected, write a ¾-1 page diary of what affected, write a ¾-1 page diary of what you life would have been like. Look back you life would have been like. Look back in your notes if needed. Use in your notes if needed. Use historical historical information information & & challenges challenges that people that people struggled and dealt with.struggled and dealt with.

Put in class folder when finished.Put in class folder when finished.