Economic Causes & Effects of the Great Depression

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Presentation transcript:

Economic Causes & Effects of the Great Depression

Causes of the GD & Stock Market Crash 1. Overproduction: too many goods (Factories & Farms) Farmers Farmers increased production during WWI Demand decreased after the war Surplus Suffered throughout 1920s -low prices (can’t pay loans/make a living) Factory workers Get laid-off Workers cannot buy goods Prices drop

2. Unevenly Distributed Wealth Causes of the GD & Stock Market Crash 2. Unevenly Distributed Wealth Rich became richer, while industrial workers simply stayed poor Created economic problems – wealthy did not buy enough to keep economy booming

Causes of the GD & Stock Market Crash 3. Easy Access to Credit Installment plans  Take home today, make payments Buying on Margin  Buy stock by just paying a small portion of what it is worth ex.- 100 shares at $10 = $1000 only pay $300 owe $700

Check for Understanding Rally Robin What were the causes of the Great Depression & Stock Market Crash?

Causes of the GD & Stock Market Crash Stock Market Crash, Black Thursday, Oct. 29, 1929 How??? Buying on Margin (Borrowing $$) Remember our example… 100 shares at $10= $1000 only pay $300 still owe $700 Problem - stock crashes, you lose your money, and can’t pay back stockbroker Stockbroker can’t pay back bank

Effects of the GD & Stock Market Crash Banks Collapsed What happens to your money when you put it into a savings account? *Simulation* Bank Failures Banks closed and lost $$$ People defaulted on loans (can’t pay back) Banks could not cover their deposits, because it was lent out to bad creditors 5,000 banks closed between 1929-1932 People lost entire LIFE SAVINGS

= + Banks Close Banks have no money to give people People Default on Loans People Loose savings

1920’s Problems BANKS Have NO $$ PEOPLE LOST SAVINGS & JOBS Factories making too much; farms growing too much. BANKS Have NO $$ PEOPLE LOST SAVINGS & JOBS NO ONE TO HELP! Factories Fire Workers (Don’t need them) Farm Prices fall (Farmers can’t make $$) Banks Close because they have no money: Loans have not been paid back, can’t give people their savings Farmers & Factory Workers can’t pay back loans to Banks: DEFAULT!!

Effects of the GD & Stock Market Crash Banks Collapsed Businesses Closed Unemployment Rose Hawley-Smoot Tariff, June 1930 “Protective tariff” – to protect American products from foreign competition Raised prices on foreign imports Destroyed international trade

Check for Understanding Partner Activity – Create a radio show. One partner will be the D.J. and the other will be a citizen calling in to the radio show. The D.J. will ask the caller questions about how the stock market crash is affecting the caller. The caller will respond by discussing his/her concerns.

The Government’s Response

The Government’s Response Hoover’s Response Volunteerism Calls on business leaders to maintain employment, wages, prices Localism Problems could best be solved at local & state levels Reconstruction Finance Corporation (RFC), 1932 More than $1 billion to RR’s & large businesses Trickle-down economics Unfortunately, $$ did not trickle down to the people who needed it most

The Government’s Response Socialism or Communism??? Some thought that these ideologies were the answer Bonus Army WWI veterans seeking bonus promised to receive (but not until 1945) 1931 they called for early payment Marched on Washington Hoover would not meet them – instead he sent Gen. Douglas MacArthur & federal troops Refer to “The Bonus Army” on pg 723