The Great Depression

Why ?

•What do you know about the Great

Depression ?

•What would you like to know about the GD ?

Key Terms / Main Ideas

• Inflated stock prices, high tariffs, mistakes by the Federal Reserve all led to the Great Depression

• Stock Market• Bull Market• Margin & Margin Call• Speculation• Black Tuesday• Hawley-Smoot Tariff

Election of 1928Election of 1928

• Herbert Hoover wins – LANDSLIDE

• “2 cars in every garage”

• First time Inaugural Address is filmed

The Stock Market• Optimism leads

people to invest heavily

• Late 1920’s we have a “Bull Market”– Long period of rising

stock prices

• Market climbs • People want in

Uh - oh• If stock value dropped, broker

might demand immediate repayment = Margin Call

• Many speculators get into the Market to “Get Rich Quick”– No regard for earning potential

of stock– Bid prices up– Big Risks

• Tuesday, Oct 29, 1929……..

CRASHCRASH• Prices got too high - start dropping• Margins are “called”• Investors get nervous start to sell, prices drop

even more….

•BLACK TUESDAY$10-$15 Billion dollar loss in ONE DAY !!!

Trickle Down Effect….really a RAGING RIVER

• Bank investments lose money• Speculator’s loans unpaid• Fewer bank loans =

consumer buying power drops• Banks “run out of money”

– CLOSE – No Deposit Insurance…too bad…

• “Runs” on banks• ….But wait….there’s more…..

Where did we go wrong?

• Over production– Not enough money to buy all products being made– Cut back on production – Reduce workforce / slow production down

• Hawley – Smoot Tariff– Meant to protect American goods– Foreign nations raise their tariffs too– US exports drop 20%

• Federal Reserve Bank– Did not raise interest rates – banks kept lending money

• Speculators drove up stock prices• Businesses continued to expand – “Everything is OK”

– Raised rates too late and had double “Whammy”

What You KNOW….now

•What were the causes of the Great Depression ?