Today’s Question 1. What were the four (4) major causes of the Great Depression

Causes of the Great Depression Farming Unequal Distribution of Wealth Stock Speculation Buying on Margin And other important factors

Industries Struggling industries at the end of the ’20s Agriculture Railroad Textile mills Mining

Industries Improved inventions and processes (like the assembly line) increased efficiency and helped businesses produce more goods Middle-class and poor couldn’t afford the extra goods so products piled up in warehouses If businesses can’t sell their stuff, they can’t pay their bills Materials Equipment Shipping Salaries

Industries By 1929, 71% of American families earned less than $2,500 per year (unequal distribution of wealth) $2,500 minimum for decent living Consumers used credit (installment buying) to get things they wanted or needed When people’s debt got higher than they could repay, they stopped buying new items More goods piled up

The Stock Market Americans bought stock on speculation and margin because of the extra money from war bonds and low interest loan rates. Speculation is buying and selling stocks in hopes of making a quick profit. Buying on margin is paying a small part of the stock’s price as a down payment and borrowing the rest of the money then paying the loan after selling the stock If stock prices fell, they couldn’t repay the loan since they had to sell the stock for less than they paid for it

The Stock Market September 3, 1929 stocks on the NY Stock Exchange reach high point October 24, 1929 – stock prices drop (Black Thursday) People try to sell stocks at the best price before their value drops any lower People who bought on margin forced to sell to pay loans Prices fell even lower because more people wanted to sell stocks than buy them The quickly falling prices scared off buyers A record 12.9 million stocks traded Starts the Crash of 1929 Black Tuesday (October 29, 1929) Investors sold 16.4 million shares of stocks at prices much lower than they had sold a month earlier

Banks Banks demanded people pay back money they had borrowed to buy stocks When people couldn’t repay the loans, the banks ran short of money People got scared and went to withdraw their savings from the banks The problem is banks don’t keep enough cash on hand to pay all of their depositors at once Banks that couldn’t pay closed down 9,000 banks closed by March 1933

Fear and Unemployment Scared people stopped buying new goods so businesses sold less and less Tens of thousands of businesses went bankrupt or fired workers Unemployed people bought fewer goods and companies laid off more workers Unemployed people lost their homes and went hungry since they couldn’t pay their bills

President Herbert Hoover Like many other Americans, he feared government interference might hurt the economy even more Hoover’s solutions Tried balancing the budget Cut government spending Raised taxes These “fixes” pulled money out of the economy and made things worse

President Herbert Hoover Believed federal relief (aid to the poor) would make people too dependant on the government Believed “rugged individualism” would get Americans through Americans blamed Hoover for Unemployment Hunger Homelessness “Hoover flags” and “Hoovervilles”

President Herbert Hoover Finally approved public works projects A federal agency to lend money to states, cities, and towns to build roads and dams Created jobs