Great Depression What is it? Causes and Contributing Factors

What is a Depression? – Depression – a sharp & sustained decline in economic activity Great Depression – longest/worst in economic history Depression did not occur in 1 day - progressive Oct. 29, 1929 – stock market crashed – Had been steadily growing weaker – Oct. 24 began “panic selling” of stocks – Stock prices dropped 2/3 Economy reached bottom in 1932

5 causes of the Great Depression 1.Weak economy 2.American business system was unbalanced 3.Poor distribution of purchasing power 4.Debt threatened economy 5.International debts owed, but not being paid IN your spiral – illustrate these 5 causes!

3 Contributing Factors that prolonged the Depression

1. Banking Crisis  Between over 9,000 banks closed  Bank deposits not insured & depositors lost $  Decline in bank system: reduced amount of $ available for loans/investments  Federal Reserve System (controls flow of $ to American banks) responded slowly  1931 raised interest rates (shrinking $ supply further)  Economy bottomed out in 1932  GNP declined 25% over last 3 years  Investments only 3% of what it was before crash  Farm income cut by 2/3’s

2. Unemployment Reached 25% (1 of every 4 Americans out of work) Most immediately visible in Midwest ex. 50% unemployed in Cleveland, Ohio ex. 80% unemployed in Toledo, Ohio

3. The Dust Bowl  Natural disaster that struck middle America  mid 1930’s lower than avg. rainfall from Dakotas to TX  worst areas: panhandle of TX & OK, and parts of Kansas, Colorado & New Mexico  lakes dried, plants withered, animals died  topsoil so dry that it was blown east in heavy winds  people lost land or ceased to be able to make a living off of it  many moved West b/c they heard of jobs and good crops “Oakies”  most worked as low-paid migrant farmers  farmers, despite dust, still produced more than people could buy, prices continued to fall.

Great Depression Images

Dust storms were frequent during the depression; this one occurred in Texas in 1935.

Dorothea Lange's Migrant Mother depicts destitute pea pickers during the depression in California, centering on Florence Owens Thompson, a mother of seven children, age 32, March 1936.

In the early 1930s shantytowns sprang up in cities across the United States, built by people made homeless by the Great Depression. These areas were nicknamed Hoovervilles because their inhabitants blamed United States president Herbert Hoover. This one is in Seattle.

Dwellers in a local Hooverville, Circleville, Ohio Two small children during the Great Depression- part of a squatter community (known bitterly as "Hoovervilles“)

What did the man do wrong if he really did save money to help him through the bad times? What’s different today from what happened during the Great Depression? Do you think it can happen again?