The Great Depression: 1929-1941 The economic hard times occurred 1929-1941. The worst economic crisis of the century Over 13 million people were unemployed Farmers lost crops Many lost their homes Break down of families Some people died from starvation

What Caused the Great Depression?

Cause #1: Unequal Distribution of Income During the 1920s wealth was in hands of 5-10 percent of population. Unequal Distribution of Wealth- In 1929, $2,500 was the necessary income to support a family. In that year, more than 60 % of the nation's families earned less than $2,000. Low Wages- Farmers, Miners, and Textile workers incomes declined after the mid 1920s.

Unemployment In 1932, 25 % of U.S. population was unemployed. In Akron Ohio, unemployment rate was 60% and in Lowell Massachusetts it was 90%

Cause # 2: Overproduction of Industry and Agriculture Consumer purchasing power did not keep up with production; low wages Unemployment- As production slowed, workers were laid off or factories were closed. Agricultural Depression- Farm prices were depressed since WWI because of the competition from the world market

Gross National Product (GNP) Gross National Product (GNP): The value (in US dollars) of a country's final output of goods and services in a year. The value of GNP can be calculated by adding up the amount of money spent on a country's final output of goods and services

Cause #3:Weak Banking System In the 1920s, loans were made out to people who invested in the stock market. Buying stock on margin and over speculation When the stock market crashed, borrowers could not repay loans. Without the money from the loans, the banks could not give depositors their money when they asked for it. Many banks were forced to close.

More than 5,000 banks closed between 1929 and 1932 More than 5,000 banks closed between 1929 and 1932. When the bank closed, people who had money in the bank lost money they had in the bank. A families savings could disappear overnight

Cause # 4: High Tariffs and War Debts The stock market crashed, business leaders fear pressured Congress into raising tariffs even higher with the Hawley-Smoot Act (1930). The act sealed off American markets to other nations. Other nations reacted by raising their tariffs, US trade declined.

Without U.S. money circulating, buying American goods and paying debts to bankers became impossible. World trade became non-existent and other national economies declined.

Cause # 5:Government Policies Government saw some signs of slow down, President Coolidge and President Hoover decided to play it cool by refusing to tamper with income taxes and interest rates.

Cause # 6: Stock Market Speculation When the people bought on margin, borrowers could not repay loans. Led to financial ruin. October 29, 1929 = “Black Tuesday”when stocks fell $14 billion! Unfortunately, the Great Crash of the stock market did not entirely cause the depression, but it did make the economy worse.

Cause # 7: A Cycle of Disaster All of these factors triggered one another. For example, the stock market crash ruined many investors. Without money from investors, or capital, businesses could no longer grow or expand. Businesses cut back on employees or slashed wages. Workers had little or no money to spend. Therefore they bought less, which forced many businesses to close.