THE GREAT DEPRESSION What caused the Great Depression?

What Caused the Great Depression? “Economists continue to study the Great Depression because they still disagree on what caused it. Many theories have been advanced over the years, but there remains no single, universally agreed-upon explanation as to why the Depression happened or why the economy eventually recovered.”~ David C. Wheelock

What Caused the Great Depression? 1929 Stock Market Crash? Destroyed considerable wealth Sparked doubts about the health of the economy; consumers pulled back on their spending..especially big ticket items e.g. cars and appliances. Protectionist Trade Policies & the collapse of international trade? Smoot-Hawley tariff 1930: Increased tariffs on over 20,000 import items The Depression was a world- wide phenomenon The increase caused importers to retaliate This came in the form of higher prices for US importers

Other Explanations… Failure of Capitalism Excess of the 1920s Excessive production of commodities Excessive building Skewed distribution of income and wealth

Collapse of the US Banking System “ The money stock fell during the Great Depression primarily because of banking panics. Banking systems rely on the confidence of depositors that they will be able to access their funds in banks whenever they need them.” ~ Wheelock So when a person heard about a failure of a firm or bank, they would rush to withdraw their cash so they wouldn’t lose their money if a bank failed.

THE NEW DEAL The State of the Economy

1930’s “By 1930, business activity had slowed, sales had fallen and unemployment was rising. Many businesses that had borrowed money from banks were unable to repay their loans. Prices were falling, but so were incomes. As income declined, demand for goods and services decreased. Between 1929 and 1933, the dismal facts of bank suspensions, unemployment and financial distress presented a challenge for the United States.” ~Federal Reserve Bank of St. Louis

Vocabulary: Handout Your are responsible for knowing these words and their definition. 1.Bank Suspensions 2.Unemployment Rate 3.Per capita personal income 4.Real GDP 5.Depression

US Statistical Data When banks failed, depositors lost their money and people lost confidence in the banking system. As a result, people who still had money in banks rushed to withdraw it. Money supply declined: Money supply is the amount of currency, coins and checkable deposits people have. People who were unemployed had no income and were unable to purchase goods and services, which resulted in decreased GDP. With your group, answer the questions based on the US Statistical Data from Be specific and purposeful with your responses.

FDR “ We have two problems: First, to meet the immediate distress; second, to build up a basis of permanent employment. As to the immediate relief, the first principle is that this nation, this national government if you like, owes a positive duty that no citizens shall be permitted to starve. In addition to providing emergency relief. The federal government should and must provide temporary work wherever that is possible.” ~Franklin D. Roosevelt October 1932

It IS a New Deal Focus on three areas 1. Relief programs to help immediately. 2. Recovery programs to help rebuild. 3. Reform programs to prevent the disaster from reoccurring.

Activity Using the list of New Deal Programs given to you, identify if they are relief, recovery, reform or a combination category. Be prepared to explain your answers. Choose one person to be the spokesperson for your group.