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causes of Great depression “Go on, take the money and run” --Steve Miller Band

The roaring twenties Decade of the consumer Supermarkets and chain stores started in the 1920s  consumerism and materialism New products: vacuums, dishwashers, refrigerators, automobiles, and radios Those that could not afford these new luxury items upfront found ways to finance them

economics In the prosperity of the 1920s, many believed financial security would never end So, laissez-faire should continue Stock market steadily rose as shares saw a 40% increase by 1929 More people began buy stock hoping to strike it rich. This led to…

Speculation – buying stock hoping the price will go up so it can be sold at the higher price Buying On The Margin – buying a full share of stock for the fraction of the cost  Bank Loans – to make a profit, banks loan money to investors and collect interest from those loans Many banks loaned money to speculators who hoped to strike it rich Banks themselves invested in the stock market hoping to make huge profits

Causes Stock market crash NOT the major cause of the Great Depression but it undermined the economy’s ability to handle other problems like: Banks who had loaned money to speculators were unable to collect that money Banks who had invested themselves lost millions Together, these problems forced many banks to close and their customers lost everything

Bank Runs – many customers withdrew their money at once for fear of bank closures and lack of confidence in the banks Hawley-Smoot Act (1930) –to protect American business, it raised tariffs in America to highest in history This caused foreign nations to raise their tariffs leading to a decrease in sales of exported goods  American businesses suffered as did farmers International Debt Crisis – following World War I, Germany owed repartitions (war damages) to Britain and France who owed money from loans given to them by the United States. No European country able to repay war debt added to American debt (also why the Depression hit Europe as well)