1. Economic Causes & Effects of the Great Depression

2. Causes of the GD & Stock Market Crash
1. Overproduction: too many goods (Factories & Farms)
Farmers
Farmers increased production during WWI
Demand decreased after the war
Surplus
Suffered throughout 1920s
-low prices (can’t pay loans/make a living)
Factory workers
Get laid-off
Workers cannot buy goods
Prices drop

3. 2. Unevenly Distributed Wealth
Causes of the GD & Stock Market Crash
2. Unevenly Distributed Wealth
Rich became richer, while industrial workers simply stayed poor
Created economic problems – wealthy did not buy enough to keep economy booming

4. Causes of the GD & Stock Market Crash
3. Easy Access to Credit
Installment plans  Take home today, make payments
Buying on Margin  Buy stock by just paying a small portion of what it is worth
ex shares at $10 = $1000
only pay $300
owe $700

5. Check for Understanding
Rally Robin
What were the causes of the Great Depression & Stock Market Crash?

6. Causes of the GD & Stock Market Crash
Stock Market Crash, Black Thursday, Oct. 29, 1929
How???
Buying on Margin (Borrowing $$)
Remember our example…
100 shares at $10= $1000 only pay $300
still owe $700
Problem - stock crashes, you lose your money, and can’t pay back stockbroker
Stockbroker can’t pay back bank

8. Effects of the GD & Stock Market Crash
Banks Collapsed
What happens to your money when you put it into a savings account? *Simulation*
Bank Failures
Banks closed and lost $$$
People defaulted on loans (can’t pay back)
Banks could not cover their deposits, because it was lent out to bad creditors
5,000 banks closed between
People lost entire LIFE SAVINGS

9. = + Banks Close Banks have no money to give people
People Default on Loans
People Loose savings

10. 1920’s Problems BANKS Have NO $$ PEOPLE LOST SAVINGS & JOBS
Factories making too much; farms growing too much.
BANKS Have NO $$
PEOPLE LOST SAVINGS & JOBS
NO ONE TO HELP!
Factories Fire Workers (Don’t need them)
Farm Prices fall (Farmers can’t make $$)
Banks Close because they have no money: Loans have not been paid back, can’t give people their savings
Farmers & Factory Workers can’t pay back loans to Banks: DEFAULT!!

11. Effects of the GD & Stock Market Crash
Banks Collapsed
Businesses Closed
Unemployment Rose
Hawley-Smoot Tariff, June 1930
“Protective tariff” – to protect American products from foreign competition
Raised prices on foreign imports
Destroyed international trade

12. Check for Understanding
Partner Activity – Create a radio show. One partner will be the D.J. and the other will be a citizen calling in to the radio show. The D.J. will ask the caller questions about how the stock market crash is affecting the caller. The caller will respond by discussing his/her concerns.

13. The Government’s Response

14. The Government’s Response
Hoover’s Response
Volunteerism
Calls on business leaders to maintain employment, wages, prices
Localism
Problems could best be solved at local & state levels
Reconstruction Finance Corporation (RFC), 1932
More than $1 billion to RR’s & large businesses
Trickle-down economics
Unfortunately, $$ did not trickle down to the people who needed it most

15. The Government’s Response
Socialism or Communism???
Some thought that these ideologies were the answer
Bonus Army
WWI veterans seeking bonus promised to receive (but not until 1945)
1931 they called for early payment
Marched on Washington
Hoover would not meet them – instead he sent Gen. Douglas MacArthur & federal troops
Refer to “The Bonus Army” on pg 723