Causes of the Great Depression 1) Problems in Industry - Over production of goods. Demand for many goods fell, factories laid off workers… 2) Problems in Agriculture - Over-production by farmers caused crop prices to fall. Many farms could not make a profit and foreclosed upon… After crash→ Banks could not resell land

Causes of the Great Depression 3) Increased Consumer Debt - Many Americans lived beyond their means. Easy credit (buy now, pay later) on the installment plan increased debt for families. Many cut back on spending… 4) Uneven Income Distribution – Not all Americans shared in the prosperity of the 1920s. During 1920s, income of wealthiest Americans rose much more than the average family. The poor got poorer, could not afford to buy all the goods factories produced…

5. Domestic Economic Policies Trickle Down Economics : policies that benefit big business and wealthy will eventually trickle down to middle and lower classes cut taxes for upper class but raised it for middle class business owners devoted profits to expanding business and not giving workers salary increases

6) Buying on Margin and Speculation People began engaging in speculation - buying stocks to make a quick profit & ignoring risks. Many began buying on margin - paying a small percentage of stock’s price as a down payment & borrowing the rest from a broker. Brokers borrowed money from banks. Value of stock was artificially inflated (sold at higher price than it was worth) No regulations on stock trading

Unrestrained buying & selling fueled market’s upward spiral. Rising prices did not reflect companies’ worth.

7. Herbert Hoover Becomes President (1928) Hoover believed in “rugged individualism” – people could solve their own economic problems & government should not meddle in those problems. Herbert Hoover won 1928 Presidential election.

8. Stock Market Crash Early September 1929 stock prices began to fall. Some investors quickly sold their stocks and pulled out. October 1929 – Black Tuesday – the bottom of the market fell out. Shareholders frantically tried to sell before prices plunged lower. Millions could not find buyers. People who had bought on credit were stuck w/ huge debts. Others lost most of their savings. Stock market crash signaled beginning of the Great Depression.

9.Bank & Business Failures After the crash, people panicked and withdrew their money from banks. Some could not get their $ because banks had invested it in the stock market. By 1933, 11,000 of nation’s 25,000 banks had failed. Millions of Americans lost their savings accounts. 90,000 businesses went bankrupt. Unemployment rose to 25% (13 million) by 1933.

10.Depression in the Cities People lost jobs, evicted from homes, ended up in the streets. Some slept in parks or sewer pipes, wrapped in newspaper to keep warm. Others used scrap materials to build shacks. Shantytowns – little towns consisting of shacks, sprang up. Soup kitchens offering free or low cost food and bread lines were common.

Unemployment Lines & Shantytowns

Depression goes Global U.S. Investors have Little or no money to invest abroad. European countries cannot Pay off war Debts. European production tumbles. Europeans cannot afford American goods U.S. Profits plummet All European nations owed US money They could not repay loans President Hoover gave them more loans so they could repay the first loan Raised tariffs - fewer foreign goods sold in US = could not repay loans and began to default on loans

Depression in Rural Areas Farmers had one advantage over city dwellers – most could grow food for their families. With falling prices and rising debt, thousands of farmers lost their land. By 1932, 400,000 farms were lost to foreclosure.

11. The Dust Bowl Dust Bowl took place in the Great Plains states. Caused by drought & decades of harsh farming. Removed the protective layer of prairie grasses which held down the topsoil. Windstorms scattered millions of tons of topsoil and sand. Thousands of farmers were evicted. Many migrants (known as Okies) followed Route 66 to California to work as farmhands.

12. Men, Women, Children during the G.D. “Hobos” – homeless, jobless men wandered the country looking for work. Hitched rides in railroad boxcars and slept under bridges. Women - many felt they had no right to work when men were unemployed. Often starved in their homes. Children suffered from malnutrition & disease. Falling tax revenues caused thousands of schools to close.

13.Opinion Turns Against Hoover Experts believed depressions were a normal part of the business cycle. Best to do nothing and let economy fix itself. Americans grew more frustrated by the depression. Hoover held firm to his belief in “rugged individualism” and refused to support direct relief or govt. welfare. Hoover seen as a cold & heartless leader. Shantytowns called “Hoovervilles”, newspapers called “Hoover blankets”, empty pockets turned inside out called “Hoover flags”.