CAUSES OF GREAT DEPRESSION U.S. History/Gonzalez

Postwar Economic Boom

Post War Economic Boom  Twenties Prosperity:  Americans earning more than ever $61 to $87 Billion.  People were able to buy luxury goods like radios, refrigerators and automobiles.  Depression foreshadowed:  Unemployment was rising, farmers losing land, stock prices dropping. Poor people increased less people could buy luxury goods.

Causes of Great Depression:  Republican economic policies  Unchecked stock speculation  Weak and unregulated banking institutions  Overproduction of goods  Decline of the farming industry  Unequal distribution of wealth

Republican Economic Policies

Republican economic policies Domestic economic policies: – “The business of America is business.” – Trickle down economics: give tax cuts to rich and they will use that $ to reinvest in their companies. – Business got tons of tax cuts. International Economic Policies: – Hawley-Smoot Tariff Act: High tariffs on imported goods was put to protect American goods, but didn’t work. – Did not forgive loans to European Allies for the war

Real Estate and Stock Speculation

 Real Estate speculation:  People began to buy land in California and Florida in an attempt to sell for a quick profit. However the real estate boom went bust when the amount land for sale exceeded the demand for new housing.  Uncheck Stock Market Speculation:  People began to buy and sell stock. They felt that companies stock prices would increase indefinitely. This made stock prices go up artificially and did not represent the actual worth of company.

The Stock Market Crash and the Banking Industry Collapse

 1929 Stock Market Crash  People became nervous of high stock prices. Many investor began to sell their stock and prices came down. Companies slowed production and made less money.  October 29, 1929 “Black Tuesday”- total loss of $16 Billion ($192,054,989, in 2009)  Bank Failures  Lent money to individuals to buy stock, people could not take out money from banks

Why banks failed? 2. Banks lend out money to individuals through loans. 3.Banks lent out too much to people who used money to buy stocks. 4. Banks makes or loses money by investing in companies stock 5. Banks loses money that was deposited by people. 1. Banks get money from people savings or checking

Overproduction

 Agricultural Goods  During WWI, farmers made $ producing food for the War.  Once war was over, there was less demand for food. Farmers could not sell left over food and took a loss.

Decline of Farming Industry

Decline of Farming industry  Because farmers could not sell their crops, many farmers lost their farms.  Dust Bowl: Terrible drought that made soil turn into powdery dust that swept across the middle of U.S.  Millions of farmers from Midwest moved to California were they lived in makeshift shacks and shanties outside city limits.

Unequal Distribution of Wealth

 Gap between Rich and Poor:  1929, 1% of population owned 59% of wealth in U.S>  60% of population lived below the minimum subsistence level of $2,000.  Rich were getting richer and poor were getting poorer.