Causes of the Great Depression (Part 2) March 17, 2015

1.Farmers 2.Unequal Distribution of Wealth 3.Buying on CREDIT hides problems Americans STILL buying (on credit) – Don’t think there’s a problem because consumption is still up 1930: 80% of radios on credit – 60% cars – STOCK purchased on CREDIT too STOCK PRICES continue to rise as people buy goods on CREDIT September 3, 1929: Stock Market PEAKS (reach its highest) – From September 4 – 23: downward spiral October 24, 1929: Black Thursday – Investors SELL, SELL, SELL (even at a LOSS) Need to earn SOMETHING (GE – from $400 to $283

October 29, 1929: Black TUESDAY – Stock market CRASH – Stock prices CRASH DOWN – More than 16 million shares SOLD in 1 day – BILLIONS of dollars lost in 1 day Stock Market Crash did NOT CAUSE Great Depression – But…It officially marked the start of the Great Depression – 1929 – 1941 What happens NEXT??? 1.Banks Close People lost all their money in stocks Go to bank to withdraw funds Banks can’t handle amount of withdraws & CLOSE – 1929: 640 banks close – 1930: 1,350 banks close – 1931: 1700 banks close

2.Businesses Close Spending DOWN = Production DOWN = Stock Prices DOWN EQUALS Businesses Close/ Layoff 1931: Henry Ford lays off 75,000 workers HIGH unemployment LEADS TO LESS spending – Cut MORE Production and CLOSE more businesses By 1933: 25% of country unemployed 3.Raise Tariffs Hawley-Smoot Tariff (raise tariffs) Europe retaliates (raises tariffs for U.S. goods) 4.U.S. STOP loaning Money to other countries Example: Dawes Plan (money loaned to Germany to pay England and France) RESULT: Businesses FAIL, Banks CLOSE, HIGH unemployment in EUROPE DEPRESSION IS GLOBAL

What caused the Depression?? Lack of Gov’t INTERFERRANCE – Laissez-faire IF: Paid attention to farmers, THEN… – 25% of workers wouldn’t have suffered – And, farmers could’ve kept SPENDING Gov’t monitor CREDIT, THEN… – Americans wouldn’t be able to purchase everything on CREDIT Gov’t get in involved in BUSINESS, THEN… – Monitor wages/ wealth in country