The Great Depression: Causes and Effects 6.3: Explain the causes and consequences of the Great Depression, including the disparities in income and wealth distribution; the collapse of the farm economy and the effects of the Dust Bowl; limited governmental regulation; taxes, investment; and stock market speculation; policies of the federal government and the Federal Reserve System; and the effects of the Great Depression on the people.

Black Tuesday Stock Market Crash October 29, 1929 Result not Cause Signals the start of the Great Depression *Only WWII gets America out of the Great Depression, not New Deal

Causes of the Great Depression 1. Disparity of Incomes 2. Buying on Credit 3. Farm Economy Collapse 4. laissez-faire policy and the end of Progressivism 5. Taxes 6. Stock Market Speculation 7. Federal Reserve

1. Disparity of income Roaring 20’s: good times; high employment and no inflation However, Gap between rich and poor was very large Majority of workers lived below poverty line ($2500 in 1929) Companies were making lots of money, but did not share this with their employees

2. Buying on Credit At some point creditors will stop giving people credit Consumers cannot buy anymore Drop in consumer spending = lay-offs Layoffs = less spending, which then = more lay-offs

3. Farm Economy farmers produce too much farm prices fall farmers produce more to keep up prices fall even more farmers cannot pay their loans, default defaulting puts banks out of business

4. laissez-faire policy and the End of Progressivism Big Business allowed to do whatever they want - laissez-faire tariff raised on foreign goods to help protect US industry child labor and minimum wage overturned Is this an end of Progressivism? Who does the tariff hurt?

5. Taxes taxes on the wealthy are slashed so who is paying taxes to the government? Wealthy spend money on luxury items, not items produced by the common factory worker Or the tax money saved was put in the stock market rather than their companies (R&D, factories, or workers), so why give a tax break? **then the companies saw the excess inventories and started pulling money out of the Market**

6. Stock Market Speculation “get rich quick” buy on margin - investor allowed to borrow the money to buy stocks now People had to sell, which drove the price down even further Black Tuesday - some wealthy tried to prop up the Stock Market, but to no avail

7. Federal Reserve charged low interest and businesses would borrow - goes to workers who buy products charge high interest people don’t borrow - discouraged lending **If government, would have cut interest rates the Great Depression would have been as intense or long lasting**

Government to the aid 1. because of influence of Big Business the Government issues a tariff - which made goods high other Countries can’t sell their goods in America and therefore cannot buy American Also impose their own tariff on American goods 2. President Hoover urges companies to voluntarily maintain wages and hours - companies do the opposite 3. Advocates “rugged individualism”

Impact on the People 25% Unemployment People lost their homes - took to the streets People that still had jobs had their hours and wages cut People only bought necessities - further led to lay- offs “Runs” on banks people fear losing money and take all their money out of banks

Images Soup Kitchens Bread Lines Hoovervilles Dust Bowls Okies Bonus Army

People people undernourished schools closed Abandonment increases – Men leave families for work or shame Suicide rate increases sharply birthrate fell – Men no longer the head of the household People looked to the government for help

Birth Rates in U.S.