Causes and Effects of the Great Depression

Cause #1 Stock Market Speculation Effect: Prices of stock rose higher than they were really worth

Cause #2 Over-borrowing Effect: People borrowed (given loans) more money than they could afford to repay. Loans could not be fulfilled thus banks could not make payments to businesses. Workers were eventually laid off.

Cause #3 Personal Debt Effect: Americans bought too much “beyond their means.” Remained in debt when laid off and had to sell belongings.

Cause #4 Unwise Bank Practices Effect: Banks invested too much in the stock market and lost money. “Runs on Banks” caused banks to fail when bank withdraws exceeded cash deposits.

Cause #5 Laissez-faire attitude of Government Effect: Government officials and Americans believed that the economy will work itself out of the depression; —HOWEVER--- it only created even more problems.

Cause #6 Industrial Overproduction Effect: Companies produced more than they could sell. Businesses either slowed production or laid workers off to get rid of surplus.

Cause #7 High Tariffs Effect: Other countries had difficulties selling their products in U.S.; in turn, they will not be able to buy American goods and pay off wartime debts.

Cause #8 Depressed Agricultural Production Effect: Droughts and overproduction caused prices to decline and farmer to lose income. Farmers could not pay off debts or buy goods. Farm communities in their own “depression”