Presentation on theme: "Causes of the Great Depression"— Presentation transcript:
1Causes of the Great Depression Unequal Distribution of Wealth, High TariffsOverproduction in Industry and Agriculture,Farm Crisis, War Debts,Stock Market Crash
2Though historians disagree over the exact cause, most identify a few main sources of the problem CausesOverproductionAgricultureIndustryUnequal Distribution of wealth80% of Americans had no savingsMonetary PoliciesBuying on Credit, InstallmentsHigh Tariffs and War DebtsStock Market Crash and Panic
3Installment buying, using credit and paying back in small amounts allowed people to buy cars and new products they didn’t have the money to pay for up front
5Rural Poverty in the 1920sAlthough the nation’s wealth grew by the billions, it wasn’t evenly distributedThe products available to many in the urban areas were still considered luxuries for those in rural areas—most of whom still did not have electricityThe top 1% had a 75% increase in their disposable income while the other 99% saw about 9% increaseMost Americans had no savings
7War DebtsAt the end of World War I, European nations owed the United States $10BThey had no way of paying it back because of their devastated economiesCoolidge wanted the debts paid—this forced the Allies to demand payments from GermanyEurope could then not purchase American goods—this did not help the U.S. economy
8High TariffsIn 1922, the U.S. passed Fordney-McCumber Act which put high tariffs in place on industrial products (this action forced Americans to buy local products—which doesn’t help foreign economies that are trying to recover from the war)Other countries retaliated by taxing American goods heavily and world trade declinedThe decline in world trade contributed to the global depression
9Overproduction in Industry Factories were turning out lots of products—wages weren’t rising enough for workers to buy themThe surplus products couldn’t be sold overseas because of the high tariffs and lack of money in Europe
10Farm OverproductionFarm incomes dropped in the 1920s because of surplusesPrice of farm land fell from $69/acre in 1920 to $31 in 1930In 1929 average annual income for an American family was $750 but was only $273 for farm families30% of Americans still lived on farms
13Hoover WinsAl Smith was Catholic and many did not trust him, Hoover was very popular for having fed starving Europeans following World War I and for his work as Secretary of Commerce“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing among us.” 1928
14Hands Off President Hoover was himself a self-made man “I do not believe that the power and duty of the General Government ought to be extended to the relief of individual…though the people support the Government the Government should not support the people.” 1930
15Farm CrisisFarmers who had been suffering during the 1920s suffered further declines during the Great Depression as wholesale food prices collapsed.Farmers then had little or no money to purchase equipment to maintain their farms and many could not pay their mortgages and lost their farms
16ForeclosuresA foreclosure happens when an owner cannot pay for their mortgage and the bank repossesses the property to sell it
17SpeculationSpeculating is buying stocks out of a desire to get rich quickly rather than investing because of a sound investmentWhat’s wrong with this kind of investment?
18The Crash on Black Thursday Many people date the beginning of the Depression at October 24, 1929, Black Thursday, the day the stock market crashed.This was traumatic for those who owned stock as sales volume broke all records. But the decline in overall stock prices was only about 2.5%measured by the New York Times index of 50 stocks.Most of the decline still laid in the future; the market hit bottom on July 7 of when the Times index was only 33.98, a decline of over 89% from its high of of September 19, 1929.
19Reasons for the crashStocks were overpriced due to speculation— meaning they weren’t worth their sale priceThere was also lots of fraud and illegal activity due to a lack of regulations and rules of tradingMany had made their purchases with borrowed money. Bad idea.