Causes of the Great Depression

Possible Causes of the Great Depression Stock Market Crash Over production Unequal distribution of wealth Consumerist Culture Tariffs and War Debts Monetary Policy and Financial Panic

Stock Market Crash Black Tuesday- October 24,1929

Stocks were overpriced due to speculation (risky investments in hopes of getting rich quick) Not worth sale price Lack of regulation and rules Lots of fraud and illegal activity People bought stocks on margin Bought using credit Prices started to fall Oct 18 th Caused panic, people rushed to sell Billions of dollars lost 16,410,030 shares traded

Drop in farm income due to surpluses and overproduction Price of land fell Price of products fell Agricultural depression in 1920 Farmers borrowed money to pay for machines 1 million farms lost by 1934 Foreclosures Overproduction in Farming

Overproduction in Industry Factories produced more products Workers wages did not increase Not enough workers could afford goods Surplus products could not be sold overseas due to high tariffs

Unequal Distribution of Wealth Top 1%= 75% increase in disposable income Money remaining after necessities of life have been paid for Other 99%+ 9% increase in disposable income 80% of Americans had no savings at all

Monetary Policy and Fiscal Panic Shrinking money supply in an effort to balance economic growth during prosperity of 20s After the stock market crash Stocks paid for on margin unable to be sold for enough money to pay off debts on the stock General fiscal panic

Bank failures On average, more than 600 banks failed each year between 1921 and 1929 All investors lost their money Bank runs People worried about their money in the bank would rush to withdraw their money from the account This would cause banks to close and sometimes fail Banks would call in loans People couldn’t pay these loans due to the bad economy

Tariffs and War Debts Tariff- a tax or duty on an import or export Hawley-Smoot Tariff of raised U.S. tariffs on over 20,000 imported goods to record levels Foreign countries retaliated by setting tariffs on US goods Exporting went down

European nations owed US over $10 billion in loans from WWI Economies devastated by war, unable to repay US insisted on repayment Europe demanded reparations from Germany to pay back loans to US Caused European financial crisis Europe unable to purchase goods from US or repay their loans in full

Consumerist Culture Buying on credit and installment plans Products could be repossessed if consumer missed payment Millions of households in debt due to credit High unemployment and bank failures meant people could not pay back their products Drop in consumer spending as economy slowed before crash Lowered prices on goods due to low demand Farmers, businesses lost money Increased unemployment or decreased wages

GQ #4 Moodle Post- DUE FRIDAY What caused the Great Depression?