Causes of the Great Depression

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Presentation transcript:

Causes of the Great Depression

Factors An old and decaying industrial base: Outmoded equipment made industries less competitive, leading to reduced sales and increased unemployment. The overexpansion of farm production: As wartime markets disappeared, farmers maintained production levels. They produced more than they could sell causing prices to fall and prevent them from repaying loans. The availability of easy credit: As debt grew and people lost jobs, they were unable to pay off creditors which led to bank failures.

Factors (cont.) Unequal distribution of income: Hoarding of money: A small percentage of Americans received most of the income. Industrial workers and farmers had little money. Hoarding of money: Individuals distrusted banks. Hoarding money in their homes constricted the money supply and stifled business expansion. Stock market speculation and buying on margin: Extreme confidence in the stock market led to poor investment choices. Black Tuesday: October 29, 1929 Buying on margin: Investors taking out bank loans to purchase stocks.

Factors (cont.) Bank failures: Monetary and fiscal policies: Banks that had invested heavily in the stock market lost millions. Panic led to runs on the bank. Monetary and fiscal policies: The Federal Reserve had kept interest rates low (encouraging borrowing) and tax policies perpetuated the unequal distribution of wealth. Trade and regulatory policies: High U.S. tariffs led to retaliatory tariffs by foreign countries. The government failed to regulate market speculation.