The Great Depression Causes of Economic Collapse

Republican Domestic and International Economic Policies under Coolidge and Hoover Domestic: Pro business, conservative – Trickle down theory Economic policies should benefit big business Give tax cuts to business Prosperity will trickle down as businesses expand and create more jobs Idea was unsuccessful and increased gap between rich and poor

International – US lent $11 billion to Allies during WWI – Europe left in economic ruin and could not repay loans – Reduced trade with Europe – High tariffs (taxes on imports)

Unregulated Real Estate Speculation Speculation: risky investments in hopes of quick profits Investors sunk $$$ in large tracts of land in California to develop housing for people migrating to California after WWI, amount of housing exceeded demand and investors could not pay loans

Investors turn to Florida – Proclaimed it a vacation and retirement retreat – Buyers bought land sight unseen – Fueled scams – Boom followed by crash, borrowers could not repay loans

Unregulated Stock Market Investors thought stock market would continue going up and companies’ profits would increase Value of companies’ stock became artificially inflated Prices went up Economists begin to warn of crisis of a “bull market”

Stock Market Crash With warning, stock owners sold while they could make a profit Stock prices fell, production decreased, prices dropped Investor groups tried to buy stock at a higher price to pump $$$ into the economy- TOO LATE Oct 29, 1929 “Black Tuesday”-in one day people lost fortunes ($16 billion) Great Depression begins

Weak and Unregulated Banking Institutions Stock market crash triggered collapse of Banks Loans were not repaid Businesses close=unemployment=bankruptcy=more unemployment=more bankruptcy Banks could not pay account holders when they attempted to withdraw form accounts Banks forced to close Banks foreclosed on farms in midwest

Overproduction of Goods Consumer demands high after WWI Factories and farmers overproducing goods Too much supply not enough demand, prices drop, profits drop =foreclosure and bankruptcy

Decline of Farming Industry Agriculture competing with industry Farmers borrowed heavily to compete Farmers could not pay loans Banks foreclosed on property Droughts and Dustbowl Farmers fled west to California, resentment – Nicknamed Oakies – Lived in “hoovervilles” – Hoboes rode trains looking for jobs

Unequal distribution of wealth Americans extremely prosperous during 1920’s Wealth controlled by elite few, while most Americans living in poverty Great Depression lasted into late 1930’s and was blamed on President Hoover