Causes of the Great Depression

False Sense of Security• F suffered

• Gross National Product (GNP) increased by (in 1920s) because rapid growth > optimism

• Unemployment low ( because companies had to keep up with demand

Stock Market

• Place where stocks are bought & sold

• S: ownership

in company >

• sold in

• So buying shares of stock = buying a piece of the corporation

• In the 1920s, overall value of stocks

• More began investing in stocks

• Why is this important?

Business & Gov’t• Prosperity of 1920s reflected success of

Presidents Harding & Coolidge’s policies

• “The chief business of the American people is business.” Coolidge

• Term for no gov’t intervention in business or “hands off” is…

Election of 1928Candidate Al Smith

Party Republican

Characteristics Quiet, shy, business-like

Outgoing, natural politician

Religion

Stance on prohibition

Supports prohibition

Supports alcohol sales

Economic Factors of Depression

• Poor Distribution of wealth

–Wealthiest income grew while rest only )

– 1929, of families income below standard of living

• Credit– B (pay in installments)

• Investors used credit to purchase stocks > risky

Economic Factors cont.• F– Created in 1913 under Pres. Wilson (bank for

gov’t)– Nation’s central bank made it harder to get

loans after concern with stocks & buying on margin >

• Credit >

• Consumer spending >

• Industries

Financial Factors of Depression

• Stock market heavily used in mid-1920s

• S in stocks increased

• Margin buying encouraged by Federal Reserve policies

• Stock prices > unrealistic levels

• Stock market crash

– B (Oct. 29, 1929)

Effects of the CrashOn Almost all suffered; lost

savings; > debt

On Depositors withdrew $; lost $ from stocks & loans; 1933 – 5,000 banks closed

On Blow to struggling businesses because banks cut off & consumers cut back; 1930 Americans saw wages drop by $4 billion; 3 million Americans lost jobs

Overseas Effects

• Depression spread throughout

– Still recovering from WWI

• American banks

• Foreign businesses laid off workers

• Gov’t (including U.S.) passed high tariffs to protect industries

– Ex.

Hoover Book Questions• Use your textbook to answer the following on a

SEPARATE piece of paper1. Read the “Inside Story” pg. 335 & explain the

causes & effects of the Bonus Army.2. Discuss the 2 key ideas of Hoover’s philosophy

a. Rugged individualism b. Associative state3. What pattern of economic governing did Hoover

continue from Harding & Coolidge?4. List at least 3 actions Hoover took in response to

the Great Depression5. How were cooperatives supposed to help farmers?6. Why did cooperatives backfire?

Questions continued

7. Answer the question for the political cartoon on pg. 337

8. What was the purpose of the Reconstruction Finance Corporation (RFC)? a. Why is that a problem?

8. What was the purpose of the Smoot-Hawley Tariff? a. Explain the result.

9. How did the nation respond to Hoover’s efforts?10. Read “Faces” on pg. 338 and answer the question11. Read the excerpt below the picture on pg. 339 –

How did the public respond?