1. Causes of the Great Depression

2. Factors An old and decaying industrial base:
Outmoded equipment made industries less competitive, leading to reduced sales and increased unemployment.
The overexpansion of farm production:
As wartime markets disappeared, farmers maintained production levels.
They produced more than they could sell causing prices to fall and prevent them from repaying loans.
The availability of easy credit:
As debt grew and people lost jobs, they were unable to pay off creditors which led to bank failures.

3. Factors (cont.) Unequal distribution of income: Hoarding of money:
A small percentage of Americans received most of the income. Industrial workers and farmers had little money.
Hoarding of money:
Individuals distrusted banks. Hoarding money in their homes constricted the money supply and stifled business expansion.
Stock market speculation and buying on margin:
Extreme confidence in the stock market led to poor investment choices.
Black Tuesday: October 29, 1929
Buying on margin: Investors taking out bank loans to purchase stocks.

4. Factors (cont.) Bank failures: Monetary and fiscal policies:
Banks that had invested heavily in the stock market lost millions.
Panic led to runs on the bank.
Monetary and fiscal policies:
The Federal Reserve had kept interest rates low (encouraging borrowing) and tax policies perpetuated the unequal distribution of wealth.
Trade and regulatory policies:
High U.S. tariffs led to retaliatory tariffs by foreign countries. The government failed to regulate market speculation.