Economic Problems lead to Depression US History Standards: SSUSH17 The student will analyze the causes and consequences of the Great Depression. a. Describe the causes, including overproduction, underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression.

Post World War I Foreign Policy After the problems of World War I, many Americans wanted to avoid involvement in other countries, so American adopted an isolationist foreign policy President Harding called for the nations of the world to disarm, or voluntarily give up their weapons

The Teapot Dome Scandal in 1923, scandal struck the Harding Presidency the extent of the scandal wasn’t fully known until after Harding’s unexpected death in August of 1923 in the Teapot Dome Scandal, Harding’s Secretary of the Interior Albert B. Fall secretly gave oil-drilling rights on government oil fields in California and Teapot Dome, Wyoming to 2 private oil companies in exchange, Fall got over $300,000 in illegal payments there is no evidence that Harding or his VP Calvin Coolidge knew about the scandals Warren Harding Calvin Coolidge

The administration of Calvin Coolidge Coolidge believed in laissez faire and he believed in leaving business alone to let it grow The Kellogg-Briand Pact was passed in 1927 – 15 nations vowed not use the threat of war when dealing with each other Coolidge chose not to run again and Herbert Hoover was elected President in 1928

Declining Economy and Uneven Prosperity After World War I ended, most industries, including railroads, textiles, steel, mining and lumbering, saw a decline Farmers were perhaps the worst off of everyone – prices rose and international demand for crops weakened Many farmers had taken out loans for land and equipment – as prices rose, farmers couldn’t repay their loans and many were foreclosed on Life for farmers and workers did not improve – they still struggled to survive and could not afford the new consumer goods or to invest in the stock market By the end of the 1920s, Americans were buying less because prices were rising and wages weren’t

Declining Economy and Uneven Prosperity con’t Americans will be swayed by advertising and will buy things they can’t afford like electric appliances and Model T’s on credit as a part of the new consumer economy As a result, many Americans became mired in debt It didn’t take long for the market to become saturated with more goods than people wanted or needed Companies overproduced consumer goods that they weren’t selling (underconsumption) During the 1920s, the rich got richer and the poor got poorer

Stock Market Crash Stocks rose sharply throughout 1928 and 1929, causing people to sink more and more money into the market In an effort to “get rich quick,” many investors engaged in speculation, the practice of making high risk investments in hopes of making a huge profit The large increase caused investors to sell their stocks when they fell the slightest bit This lead to a mass sale and on October 29, 1929 (known as Black Tuesday), the Stock Market crashed The Great Crash initially only affected the small number of investors, but it soon rippled to affect the entire country

Stock Market Crash con’t The crash of the stock market resulted in the following problems: 1. banks made risky loans to businesses who weren’t able to repay them 2. the banks called in the loans they had made to consumers who were unable to repay them 3. people rushed to withdraw their money from the banks, the banks recalled the loans they had made, and failed when people weren’t able to repay them 4. savings accounts vanished – people lost all the money they had in the banks 5. businesses couldn’t borrow money so they had to cut their production 6. unemployment rose as businesses laid off workers due to the cuts in production – the problem only worsened with time

Great Depression This lead to the Great Depression which soon spread around the world By 1932, over 12 million people in the United States were unemployed

Causes of the Great Depression 1. the wealth was unevenly distributed and consumers spent more than they could afford which lead to an unstable economy 2. speculators borrowed money and sunk it into the Stock Market – the borrowers couldn’t repay the money 3. there was too little money in circulation to help the economy recover