Causes of the Great Depression Lecture 1 Standard 11.6.1

Standard 11.6.1 Describe the monetary issues of the late 19th and early 20th century that gave rise to the establishment of the Federal Reserve and the weaknesses in key sectors of the economy in the late 1920s. Essential Question: What factors led to the Great Depression? Was it inevitable or could it have been prevented? Explain.

“I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering…The lesson should be constantly enforced that though the people support the Government the Government should not support the people.” —Herbert Hoover, 1930

1928 R Herbert C. Hoover 21,391,993 444 D Alfred E. Smith 15,016,169 531 R Herbert C. Hoover 21,391,993 444 D Alfred E. Smith 15,016,169 87

Causes of the Depression Agricultural Depression demand for farm produce fell after WWI farmer’s couldn’t pay their loans thousands of farms were seized by banks 11.6.1

Distribution of $$$ Uneven Distribution of Wealth poor families couldn’t afford to buy goods rich families didn’t buy enough to help the economy 1% made over $10,000 5% made $5,000 – 9,000 29% made $2,000 – 5,000 65% made under $2,000 11.6.2

Credit Easy Credit buying on margin real estate speculation average people had no safety net when the depression began 11.6.2

The Crash Black Tuesday – October 29, 1929 JP Morgan himself tried to buy enough stock to stop the crash 16 million shares were sold in one day Thousands lost their jobs within two months stocks dropped $40 billion about the cost of WWI GE dropped from $400 to $283 a share 11.6.1

The Great Depression worst economic crisis in American history in the past, government did little or nothing economy got better the nation had to rethink the relationship between government welfare of regular people

Tariffs Hawley-Smoot Tariff, 1930 to protect US business, the government raised the tax on imports other countries responded with their own taxes international trade plummeted 11.6.1