CAUSES OF THE GREAT DEPRESSION. Definition of the Great Depression ► An economic depression in the United States and Europe ► Lasted from 1929-1941.

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Presentation transcript:

CAUSES OF THE GREAT DEPRESSION

Definition of the Great Depression ► An economic depression in the United States and Europe ► Lasted from

What caused the Great Depression? ► 1. Consumer spending fell and factories laid off workers ► 2. Agricultural Depression which had lasted throughout the 1920s ► 3. No European market for American products ► 4. Buying stock on margin in an over-valued stock market

Cause 1 = Consumer spending fell and factories laid off workers ► Consumers stopped purchasing goods by late 1920s because they already had what they wanted  Factories had surplus of goods in warehouses  Factories had no profits and began laying off workers  Laid off workers had no money and could not purchase products ► Tax policy did not favor a more equitable distribution of wealth

Huge Disparity in Wealth

Cause 2 = Agricultural Depression ► Ag. Depression lasted throughout 1920s ► Farmers had not been able to pay off loans ► Produced more commodities to pay off loans, which lowered prices for farm products and led to the Dust Bowl ► Went bankrupt and lost farms

Cause 3 = No European Market ► World War One ruined the European economy ► American tariffs prevented European manufactures from earning profits and hiring workers

Cause 4 = Investing in an over- valued stock market ► People invested in the stock market even though business profits were declining by late 1920s ► People invested in the stock market because they were getting loans from banks which they used to buy stock  This was called: Buying on Margin

Great Depression begins with the collapse of the stock market on “Black Tuesday” October 29, 1929 ► Panic Selling ► Value of Stock Declined ► Speculators could not pay off bank loans b/c value of stock declined (remember buying on margin) ► Banks went out of business and depositors lost their savings

Dust Bowl: A Closer View ► Definition: A parched region of the Great Plains (Arkansas, Kansas, Oklahoma, etc) where drought and soil erosion created enormous dust storms in the 1930s ► Erosion occurred from over planting during the late 1910s and 1920s ► Farmers went bankrupt and many went to California --- “Okies” ► Topic of John Steinbeck’s Grapes of Wrath

Dust Bowl

Great Depression and its Global Impacts ► Stock market crash of 1929 meant that ruined stock investors and laid-off workers could no longer make payments owed to banks for loans and mortgages.  Many banks closed and people lost life savings  Other banks survived by demanding full repayment of loans made to European firms ► Herbert Hoover passed Smoot-Hawley Tariff  Wanted to protect U.S. industries from foreign competition