Aim #63: What were the causes of the Great Depression? Do now! On a separate sheet of paper, explain what you believe was the most significant cause of the Great Depression based on the last night’s reading I HOPE NOT 

Causes of the Great Depression 1.Overproduction and Disparity in Wealth 4) Political Decisions 3) Stock Market 2) Failed Monetary Policy

(I) The Great Depression Begins a.Stock market Crash (Black Tuesday) 1.Buying on margin: investors only required to put down 10-20% of the stock’s price in cash and borrow the rest 2.Dependent on Borrowed $ 3. Wiped out Investors More than $20 Billion in market value wiped out

After the crash, people tried to withdraw their money from banks When banks could not produce money for all their customers, the banks failed This led to a run on banks across the U.S… hundreds of banks failed and thousands of people lost their savings The banking failure and stock market crash led to the collapse of thousands of businesses

(II) Causes of the Great Depression a.Overproduction in both agriculture and industry 1.Nation produced more goods than consumed b. uneven distribution of wealth 1.workers’ wages did not increase enough 2.Most families lived below the poverty line (more than 60% of the nation’s families earned less than $2,000 a year Distribution of Wealth in the 1920s * An income of $2,500 per year was considered the minimum amount needed for a decent standard of living

Causes of the Great Depression Year the depression began

c. International economic problems 1.War reparations, war debts and high tariffs all contributed to the problems d. Too much reliance on credit 1.Installment plan over-stimulated consumer buying 2.Defaults on loans and bank failures

Increasing American debts Many Americans used credit to live beyond their means, generate large debts, and had to cut back on spending by the end of the decade

e. Failed Economic policy 1.The Federal Reserve was supposed to serve as a protective “watchdog” of the nation’s economy 2.In the 1920’s, the Fed encouraged buying on credit by lowering interest rates which led to more borrowing by Americans f. Poor Political Decisions 1. Conservative economic policy: Laissez faire, let the market right itself without government intervention 2. main belief: private charities, churches, state and local governments provide relief and assistance to the poor, not the Federal Government BUT…Most of these were ill equipped to deal with the number of people in need

g. Depression of American Farms 1.Farm prices dropped since WWI 2.Strapped with long term debts and high taxes 3.Farmers defaults on their debts

The Great Depression led to a collapse of the American financial system by 1933 Americans lost confidence in banks as 25,000 banks failed; The lack of banking meant there was no money for investment The lack of spending and stock market crash led to failure of 90,000 businesses Unemployment peaked at 25% of all Americans; People lost their homes, farms, and businesses The USA had record poverty and suicide rates and healthcare declined; Charities offered soup kitchens and breadlines to help