1. The Great Depression: Causes Essential Question- What were the causes of the Great Depression? Words of the day: Depression- long term downturn in economic activity Tariff- a tax on imports or exports paid by the seller, not the buyer

Warm Up: Picture Inquiry Answer these questions Where do you think these pictures were taken? What is happening in the pictures? What reasons can you think of to explain why they are in this situation? First picture: Hooverville in

The Election of 1928 The prosperity of the 1920s, which the Republicans took full credit for, led to a landslide election for Herbert Hoover. America was optimistic and confident about the future of the country. “We are nearer to the final triumph over poverty than ever before in the history of any land.” President Herbert Hoover   Think about the 1920s and the life style of many people. Why was an economic collapse unimaginable to most people in 1928?

Causes of the Great Depression Overproduction Manufacturers were producing more goods than they could sell.   How would this contribute to a depression? Farms and businesses across the country were going broke

Causes of the Great Depression Speculation and the Stock Market Many people bought stocks hoping to get rich. Quick profit would occur only as long as stock prices kept rising. How would this contribute to a depression?   The Stock Market   Sometimes, the stock market has long periods of rising stock prices (Bull Market) which convinces people to invest in stocks. Buyers engaged in speculation, or buying stocks for a quick profit (anticipating that prices will go up) while ignoring the risks. Many investors bought “on margin”- they paid a small percentage of a stock’s price as a down payment and borrowed the rest. When the market crashed millions of people lost everything

Causes of the Great Depression Speculation and the Stock Market Many people bought stocks hoping to get rich. Quick profit would occur only as long as stock prices kept rising. How would this contribute to a depression?   The Stock Market   Sometimes, the stock market has long periods of rising stock prices (Bull Market) which convinces people to invest in stocks. Buyers engaged in speculation, or buying stocks for a quick profit (anticipating that prices will go up) while ignoring the risks. Many investors bought “on margin”- they paid a small percentage of a stock’s price as a down payment and borrowed the rest. When the market crashed millions of people lost everything

Stock Market Lets say you buy stock in Steve Madden shoes. The total cost of the stock is $1000. You pay $100 down and borrow $900 from a broker (Buying on Margin) Two things can happen 1. You sell the stock for $1500 and make a profit (that is what is supposed to happen) 2. OR You sell the stock for $500 and lose money. It depends on the market (Speculation)

Sold Stock for $1500 Profit: $500 Amount borrowed From Broker $900 Amount Paid: $100 Amount borrowed From Broker $900 Sold Stock for $500 Amount Paid: $100 Loss = $500 Amount borrowed From Broker $900 Amount Paid: $100 Bought stock for $1000

Causes of the Great Depression The Hawley-Smoot Tariff protected American markets but made it hard for producers to sell abroad Video: Ben Stein- Ferris Bueller Trade Restrictions President Hoover signed the highest tariff in American History. How would this contribute to a depression? Manufacturers and Farmers were unable to sell their extra stock overseas

Causes of the Great Depression Shady Banking Practices The government failed to effectively regulate either the banking system or the stock market and the Federal Reserve Board kept interest rates low throughout the 1920s. How would this contribute to a depression?   Individuals/businesses were able to take out “risky” loans What do we call a government that fails to regulate business? Laissez-Faire

Speculation and the Stock Market Many people bought stocks hoping to get rich. Quick profit would occur only as long as stock prices kept rising. Overproduction Manufacturers were producing more goods than they could sell.   Causes of the Great Depression Shady Banking Practices The government failed to effectively regulate either the banking system or the stock market and the Federal Reserve Board kept interest rates low throughout the 1920s. Trade Restrictions President Hoover signed the highest tariff in American History.  

The Great Depression Begins The Stock Market Crash Oct. 24, 1929 – stocks moved sharply downward, people could not sell their stocks fast enough No one wanted to buy stocks, top bankers attempted to purchase stocks again, only delayed the collapse October 29, 1929 “Black Tuesday” – stock prices kept falling faster and faster… the market had crashed.

Bank Failures After the crash, many Americans panicked and withdrew their money from banks. Banks don’t have people’s money, because they had loaned it out. Banks had invested in the Stock Market and lost money In 1929- 600 banks fail By 1933 – 11,000 of the 25,000 banks nationwide had collapsed Fewer banks=fewer loans=less economic growth

The Great Depression Begins Analyzing Primary Sources   1929 “It came with a speed and ferocity that left men dazed. The bottom, simply fell out of the market..... The streets were crammed with a mixed crowd — agonized little speculators,... sold-out traders,... inquisitive individuals and tourists seeking ... a closer view of the national catastrophe..... Where was it going to end?”  Account of the stock market crash in the New York Times. Imagine you were watching the stock prices fall, knowing you were losing more money each minute. What feelings would you have?

From Wall Street to Main Street People lost money in stock market; couldn’t pay bills Banks failed, people lost their savings Demand for goods decreased Factories closed, employees lost their jobs People lost their homes, no one able to buy the foreclosed homes No safety net, Americans found themselves homeless

Ending Activity What happened to the man in this cartoon? Why might the cartoonist have chosen a squirrel to represent a “wise economist”? What does the cartoon imply about who was to blame for the Great Depression? Which individuals are the ones at fault? In your own words, what is the message of this cartoon?