Causes of the Great Depression

What were economic trends of the 1920’s? Positives Negatives Consumption went up Farmers suffered as demand and prices fell Gross National Product went up Uneven distribution of wealth Stock Market rose Overuse of credit Production and efficiency

Election of 1928 Republicans nominated Sec. of Commerce Herbert Hoover Democrats nominated Alfred E. Smith (NY) Hoover was elected in a landslide Americans credit the Republican Party for the economic growth of the 1920’s Hover promised “A chicken in every pot. A car in every garage.” Vowed to end poverty.

Why Did the Stock Market Crash on 10/29/1929? Stock speculation & buying on margin Economic growth based on customer confidence Nervous investors sold off stocks in massive amounts Normal business cycle “Black Tuesday”

Americans panicked and rushed to pull their $$$ from banks The Federal Reserve cut interest rates and limited $ supply Banks did not hold enough $ and were forced to close Bank deposits were not insured by the government so people lost their $ Business also suffered as many owners turned to cutbacks to save their business  layoffs, reduced payrolls, closing plants

How did Depression Grow? Unemployment grew and incomes shrank U.S. government passed the Hawley-Smoot Tariff which raised prices on foreign goods to make American made products more competitive European nations passed protective tariffs of their own on American made products International trade was virtually destroyed U.S. was unable to continue loans to Europe to fund WWI reparation debts European economies collapsed

What caused the Great Depression? Historians and economists disagree on the exact causes of the Great Depression Economist John Maynard Keynes argued that lack of government regulation helped caused the depression Also believed that the government should invest more $ in the economy to help fix it Other economists like Ludwig von Mises and Friedrich con Hayek disagreed with Keynes