Presentation on theme: "Causes of the Stock Market Crash & Great Depression."— Presentation transcript:
Causes of the Stock Market Crash & Great Depression
CAUSES Wealth is unequally distributed among the population Many people go into debt on installment plans Old and decaying industrial base makes U. S. industry less competitive Industry and agriculture overproduce Government pursues unsuccessful economic policies Stock market crash leads to financial panic The Great Depression EFFECTS People suffer widespread unemployment, hunger, poverty, and homelessness Industrial and farm production falls World economic crisis develops Democrats win victory in 1932 Roosevelt initiates the New Deal
Troubling Economic Signs in the Late 1920s Artificial prosperity (war boom) hid the weaknesses of many key American industries until the late 1920s. Old Industries (textiles, steel, railroad) & New Industries (automobile, consumer goods) all suffered from competition, lack of demand, and new technology. The decline in the key industries had a trickle down effect on the rest of the nations industries.
Postwar = demand for farm products declined by 50%. To compensate for lost income, farmers boosted production with the hope of selling more crops (increase in supply, lowered demand & price). By the late 1920s, Americans bought less because of rising prices, stagnant wages, unbalanced distribution of income, & too much buying on credit created an economy that was ripe for depression.
Causes of the Stock Market Crash October 29th 1929, Black Tuesday the bottom fell out and 16 million shares of stock were dumped. During the last week of October 1929, the Stock Market lost 30 billion in stock value (= the same amount of money the U.S. spent on WWI).October 29th 1929, Black Tuesday the bottom fell out and 16 million shares of stock were dumped. During the last week of October 1929, the Stock Market lost 30 billion in stock value (= the same amount of money the U.S. spent on WWI).
5 reasons the Stock Market Crashed 1.Investors were speculating stocks.
5 Reasons the Stock Market Crashed 2. People bought stocks on margin.
5 Reasons the Stock Market Crashed 3. Huge selling by brokers caused stock prices to fall.
5 Reasons the Stock Market Crashed 4. Regular investors began to panic and sell their stocks
5 reasons the Stock Market Crashed 5. Banks ran out of cash reserves when stockbrokers couldnt pay them back.
Causes of Great Depression ( ) The Stock Market crash did not cause the Great Depression, but made the collapse of the economy & the Depression more severe.
1.Depressed farmers & industries 2.Uneven wealth distribution –Rich got richer & common mans wages decreased in 1920s. –Caused lack of consumer buying power to keep up with goods being produced.
3.Errors in the monetary policy –Errors in Govt handling of economy after crash, Federal Reserve System followed a restrictive policy about how much money would be allowed in circulation. –Policy dried up credit & didnt allow enough money in circulation to boost economy. 4. Decline in Foreign Trade –Our banks offered help to European countries after WWI, funds got low & we couldnt lend Europeans money = Europeans couldnt buy our goods. –1930, Congress passed Hawley-Smoot Tariff Act, to protect U.S. from European competition. –High tariffs caused Europeans to buy less American goods, killed trade and American business, and led to worldwide under-consumption.
5.Herbert Hoovers response to the Depression –He did nothing! –Elected in 1928, encouraged business leaders to voluntarily assist with effort to strengthen industry (hands-off approach). –Provided inefficient legislation to help farmers. –Believed Federal Government & State Governments would get in way of economy if they got involved.
FDR wins the election of 1932 And saves the day by promising a New Deal!