CAUSES OF THE GREAT DEPRESSION

Today’s Objective ◦ After today’s lesson, students will be able to… ◦ Explain the underlying economic factors and causes leading up to the Great Depression ◦ Essential Skill ◦ State implications and consequences

Wrap Up and Reflection ◦ Who won? ◦ What did you take away from the game yesterday?

Dow Jones Industrial Average

Dow Jones Transportation Average

Dow Jones Utility Average

1920s Booming Economy ◦ Wages up 40% after WWI ◦ Stock Market was soaring ◦ Many people were investing – get rich quick schemes ◦ 1920s fad – get into the market ◦ America had emerged as a world economic, industrial, and military power

Economic Danger Signs ◦ 200 businesses control 50% of the economy ◦ Why is this dangerous? ◦ Too much industry overproduction – surplus goods not being purchased ◦ Too many products, not enough consumers buying ◦ 80% of population has no savings

More Economic Danger Signs ◦ Banks are uninsured ◦ No government agencies monitor banks or the Stock Market – Laissez Faire/Republican Presidents ◦ Market value based on borrowed $ and over speculation instead of real money ◦ Increase in personal debts – credit debt and installment plan debt ◦ Buying Stocks on Margin – borrowed money from Stock Broker to purchase Stocks

The Warning Signs ◦ Farm prices drastically fall after WW1 ◦ Farmers paid by government to make food for allies creates a huge surplus ◦ Farmers unable to repay loans after government pulls WWI agricultural contracts ◦ 6,000 banks close out West ◦ President Hoover vetoes all bills to help farmers ◦ Laissez-Faire

Black Tuesday ◦ October 29 th, 1929 ◦ Stocks plunge again ◦ Value of market falls ◦ People sell what is left to get some $ ◦ By the end of October, over $30 billion has been lost ◦ Thousands lose everything

Stock Market Crash of 1929

Immediate Effects of the Crash ◦ Many lost life savings in the market crash ◦ Banks and Brokers call in loans – American people have no $ ◦ Hundreds of banks close ◦ No $ to pay back loans = empty savings accounts ◦ Banks not prepared for people to withdrawal $ at the same time ◦ No bank insurance ◦ 9 million savings accounts vanish

Reasons for Stock Market Crash ◦ Buying stocks on _____ ◦ Actual stock values increased/decreased by 1929 ◦ In reality, the economy was growing/contracting ◦ Stocks became _____ when no one wanted them ◦ The market _____ on Tues. Oct. 29, 1929 ◦ People ran to the ____ to withdraw their savings ◦ Banks ran out of funds because of too many _____

Why did it become the GREAT Depression ◦ “The Domino Effect” ◦ People lost their jobs after the stock market crashed. Therefore, many needed to spend their savings ◦ When large numbers of people tried to take money out of the banks, many banks went out of business because they did not have the people’s money ◦ Because people had so little money, they bought few goods

Why did it become the GREAT Depression ◦ “The Domino Effect” Continued ◦ The producers could not sell what they made so they did NOT make a profit ◦ Without a profit, factories could not pay their employees so the factory workers lost their jobs ◦ When workers lost their jobs, they could not pay what they owed to banks or businesses ◦ So more banks and more businesses began to fall.

World Wide Depression ◦ America’s intimate relationship with Europe causes serious economic troubles overseas and contributes to a world wide depression

Causes of the Great Depression ◦ Look at the often cited causes of the Great Depression ◦ Work with your group to brainstorm possible solutions ◦ Discuss and decide whether the Great Depression could have been prevented