The Great Depression Why ?

What do you know about the Great Depression ? What would you like to know about the GD ?

Key Terms / Main Ideas Inflated stock prices, high tariffs, mistakes by the Federal Reserve all led to the Great Depression Stock Market Bull Market Margin & Margin Call Speculation Black Tuesday Hawley-Smoot Tariff

Election of 1928 Herbert Hoover wins – LANDSLIDE “2 cars in every garage” First time Inaugural Address is filmed

The Stock Market Optimism leads people to invest heavily Late 1920’s we have a “Bull Market” – Long period of rising stock prices Market climbs People want in

Uh - oh If stock value dropped, broker might demand immediate repayment = Margin Call Many speculators get into the Market to “Get Rich Quick” – No regard for earning potential of stock – Bid prices up – Big Risks Tuesday, Oct 29, 1929……..

CRASH Prices got too high - start dropping Margins are “called” Investors get nervous start to sell, prices drop even more…. BLACK TUESDAY $10-$15 Billion dollar loss in ONE DAY !!!

Trickle Down Effect….really a RAGING RIVER Bank investments lose money Speculator’s loans unpaid Fewer bank loans = consumer buying power drops Banks “run out of money” – CLOSE – No Deposit Insurance…too bad… “Runs” on banks ….But wait….there’s more…..

Where did we go wrong? Over production – Not enough money to buy all products being made – Cut back on production – Reduce workforce / slow production down Hawley – Smoot Tariff – Meant to protect American goods – Foreign nations raise their tariffs too – US exports drop 20% Federal Reserve Bank – Did not raise interest rates – banks kept lending money Speculators drove up stock prices Businesses continued to expand – “Everything is OK” – Raised rates too late and had double “Whammy”

What You KNOW….now What were the causes of the Great Depression ?