11:1 Causes of the Great Depression Election of 1928 31st President: Herbert Hoover (1929-1933)
11:1 Stock Market Soars “Bull Market” “Margin” “Margin Call” A long period of rising stock prices “Margin” Buying stock with little money down “Margin Call” Demand the investor pay back loan immediately
11:1 Causes of the Great Depression “Speculation” (cause #1) Betting the market will decline or rise Way to make money quickly People ‘bet’ the market would continue to rise in 1920’s
11:1 The Stock Market Crash (1929) Market ran out of new “buyers” (cause #2) No “new money” to support the Bull Market Oct 21: “margin call” Stock Market falls Oct 24: “Black Thursday” – market falls further Oct 29: “Black Tuesday” Mid-November: 30 billion dollars lost
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11:1 Causes of the Great Depression “Bank Run” (cause #3) Many banks failed after crash Lent money to speculators Banks Invested in Stock Market “Bank Run” (cause #3) Many depositors decide to withdraw all their money at one time
11:1 Causes of the Great Depression Uneven distribution of income Manufacturing output rose 32% Workers wages only rose 8% Less disposable income to buy goods
11:1 Causes of the Great Depression Loss of Export Sales (Cause #4) Hawley-Smoot Tariff Raised tariffs (taxes) on imported goods Foreign countries do the same American business unable to sell many goods overseas
11:1 Causes of the Great Depression Mistakes by the Federal Reserve Failed to raise interest rates on loans (Cause #5) Would have stopped speculation Encouraged banks to issue risky loans Low interest rates made economy look healthy Raised interest rates too late No access to loans; tight credit