9-2: The Great Depression The stock market boom and optimism of the 1920s were generated by investments made with borrowed money. Once the stock market collapsed, the resulting Great Depression caused widespread hardships.
Stock Market Crash Causes Expansion of Credit Overspeculation Access to easy credit (borrowed money) was excessively expanded in the 1920s Overspeculation Businesses were booming, but investments were made with borrowed money
Stock Market Crash Causes Business Failures Bank Failures Stocks lost value Prices fell Production slowed Unemployment increased Businesses and individuals went bankrupt Bank Failures Bank deposits were also invested in the market When the market collapsed, the banks had no money
Stock Market Crash Consequences Run on the Banks No new investments Clients panicked and attempted to withdraw their money from the banks Banks had no money to give No new investments Fear of risking money No new investments made Economy could not grow
Causes of the Great Depression Stock Market Crash Borrowed money could not be repaid Federal Reserve Central banking structure, failed to prevent widespread collapse of the nation’s banking system in the late 1920s and early 1930s Severe contraction in the nation’s supply of money in circulation
Causes of the Great Depression Protective Tariffs High protective tariffs (Tariff Act of 1930, aka Hawley-Smoot Act) Produced retaliatory tariffs in other countries that strangled world trade Dust Bowl A drought in the Great Plains severely limited farmers’ abilities to earn a profit Many lost their homes to foreclosure
Effects of the Great Depression Unemployment Foreclosures/homelessness Collapse of financial system (bank closings) Demand for goods declined Political unrest—growing militancy of labor unions Migration
What caused the stock market crash of 1929? What were the causes of the Great Depression? What were the consequences of the stock market crash of 1929? How did the depression affect the lives of Americans?