Section 5.3 Causes of the Great Depression Pages 87-89

Stock-Market Crash Economic conditions of 1920’s started a sequence of events which led to the crash – Companies sold stocks to raise money to develop new products/expand their business. – People who bought stocks promised share in companies profits called a dividend – Bought Victory Bonds before, guaranteed certificates that they would get money back plus interest

Stock-Market Crash – Encouraged people to buy stocks – Stock prices kept rising during good times – People ignored the risks of fluctuating stock prices and that stocks weren’t a guaranteed investment like bonds – Share prices began to fall, and thousands of people tried to sell their stocks, but no one wanted to buy, and the market crashed

Roots of the Depression Stock-market crash only the immediate cause Roots can be traced back to spending/buying habits of 1920’s – Easy credit Canadian’s bought more and more – Manufacturers borrowed money to keep up with demand for goods – Everyone wanted to buy stocks and become millionaires

Roots of the Depression Manufacturing Prices – Companies produced more goods than customers wanted, creating stockpiles in warehouses that they eventually couldn’t sell Close economic connection to U.S. markets – Canada relied heavily on U.S. markets for its products. When their economy slowed so did Canada’s

Roots of the Depression Exports – Canada relied heavily on sale of goods to rest of world Lack of government regulation Therefore, as the economy slowed, companies began cutting their expenses, and people were laid off. Unemployed workers could not pay off their debt and the country fell into an economic depression