Presentation on theme: "Note Page 36 “Causes of the Great Depression” By Morgan J. Burris Lexington Middle School US History."— Presentation transcript:
Note Page 36 “Causes of the Great Depression” By Morgan J. Burris Lexington Middle School US History
Election of 1928: Calvin Coolidge – decline to run again. Rep. Herbert Hoover (Quaker) vs. Dem. Alfred E. Smith (Catholic)
Hoover Slogan: “We are nearer to the final triumph over poverty than ever before in the history of any land!” “I have no fears for the future of our country, it is bright with hope.”
The Stock Market Soars: Optimism drove stock prices to new highs. Long Bull Market 10% of Americans in market Many buying on Margin – Credit / only pay 10% down out of pocket. Margin Call – pay in more money…
You are gambling that the value of the stock goes up, If it doesn’t, you pay more out of pocket!
Late 1920’s lots of speculation – hope to make quick buck. Drove prices higher than actual value.
The Stock Market Crash: No more new investors, no new cash in market. Professionals start selling off, individuals panic….
Started Monday Oct 21st By Black Thursday - Oct 24th, market was in tailspin. 16 million shares sold, lost of $10 to 15 Billion in value. By November 1929 = $30 Billion lost.
Banks Begin to Close: 1. Banks had loaned nearly $6 billion to speculators = defaulted… 2.Banks had invested ‘deposits’ in stock market to make money themselves, now had no way to pay back depositors!
Restricted loans, business shrinks causing recession. Banks go belly up, no insurance on customers deposits, its just gone.. Bank Run – everyone rushes to withdraw. By 1932, 10% of American Banks closed.
The Roots of the Great Depression: - The Stock Market crash was not only cause, three other factors contributed to the length of the Great Depression.
1. Uneven Distribution of Wealth: Overproduction of goods Consumers buying beyond means on credit. Top 5% earn 30% income 2/3 Families earn less $2,500 yr.
2. Loss of Export Sales: European countries in recession, not able to buy American goods. Hawley-Smoot Tariff raised tariff to highest level ever, made it worst.
3. Mistakes by the Federal Reserve: Instead of rising interest rates to slow consumer spending, Fed lower them in 20s. Too many loans. Over extended businesses.
Note Page 36 “Causes of the Great Depression” By Morgan J. Burris Lexington Middle School The End