Causes of the Great

Depression

1920’s Economy 1. Describe the Economy

of the 1920’s.

2. Are there any potential problems with America’s economy?

Target

Identify and describe the long term and short term causes of the Depression.

Industry

Textiles, steel, railroads barely made profit

Why?

WWI, increased demand

War over???

Lowered demand

Housing decreased (most important indicator)

Farmers

WWI increased demand

After war?

Lowered Demand

Farmers couldn’t pay off debt

Lost their farms

Farmers con’t

Government tried to help

Passed McNary-Haugen Bill

Federal Price Supports

Prices of food set by government at a fair value

Congressed passed the Bill twice Coolidge vetoed it twice

Consumers

American’s began to buy less

Why?

Rising prices

stagnant wages

Too much credit

Led to people living beyond their means

Distribution of Wealth Large gap between the rich

and poor

$1,500 a year = decent standard of living

½ the country was making less than that!

Rich did well

Income of the wealthiest 1% rose by 75%

Wealthiest 5% made up 1/3 of the nation’s wealth

Most American’s could not fully participate in the economy

New President

After Coolidge

Herbert Hoover

Republican

Ran on “America’s Prosperity”

Stock Market

Define “Investing”

1920’s stocks rose (“Bull Market”)

Speculation

Risky business transactions on the chance of a quick profit

Stock Market Crash

People began buying Stock on Margin

Paying a small amount up front and borrowing the rest

September 1929, market peaked then started to decline

People panicked and started to sell

The bottom fell out

Black Tuesday

October 29, 1929

Stock market lost 30 billion dollars

Began the Great Depression

1929-1941

Economy in severe decline

Millions out of work

Unemployment goes to 25%

Banks couldn’t cover loans

World Effects U.S. needs $

Hawley-Smoot Tariff Act

Raised tariffs to highest level ever!

No one bought foreign goods

Foreign countries retaliated with tariffs

No one bought American goods

Sank deeper into the depression

Representative W.C. Hawley, and Senator Reed Smoot shake hands in agreement on new tariff bill