Causes of the Great Depression

Agricultural Problems Farmers suffered from debt and low market prices throughout the 1920s

High Tariffs Under Harding and Coolidge high tariffs hurt international trade and American farmers; at the same time the U.S. government was demanding the Europe pay its loans under the Dawes Plan—global depression was looming

The Structure of Business A few corporations dominated the market Increased productivity created a surplus of goods The nations economy became dependent upon the success of these few corporations

The Maldistribution of Wealth Money was concentrated in the top 5% of the population The common worker with stagnant wages could not afford to purchase luxury goods except on credit

Excessive Use of Credit Installments plans (buying on credit) ultimately led to bankruptcies went the depression hit

Stock Market Speculation No longer long-tern investors, just short term speculators who borrowed on the assumption that the stock prices would continue to rise (had done so for 18 months)—hard work not necessary to get rich Buying on margin allowed those who could not afford it to but stock, too

Stock Market Crash Black Tuesday, October 29, 1929: Unexpected selling frenzy. Those who had bought on margin were forced to sell to try to cover losses from the previous weeks. When clients attempted to withdraw their money from the banks, there was no reserve to draw from.