1. Unit 6

2. The Causes of the Great Depression Chapter 18 Section 1

3.  The Election of 1928 ◦ Republicans nominated Herbert Hoover for president who wins by a landslide ◦ “I have no fears for the future of our country. It is bright with hope”

4.  The Stock Market Soars ◦ Bull Market – long period of rising stock prices ◦ Because of the bull market people began to invest ◦ Buying on a margin – putting only a small cash payment down ◦ Margin Call – demand that the investor repay the loan at once ◦ Speculation – bet the market would continue to climb, thus enabling them to sell the stock and make money quickly

5.  The Stock Market Crash ◦ The Stock Market prices began dropping ◦ Black Thursday – Market plummeted further ◦ Black Tuesday (October 29, 1929) – Stock Market prices took the steepest dive ◦ The Stock Market Crash was not the single major cause of the Great Depression

6.  Banks Began to Close ◦ Banks had loaned nearly $6 billion to stock speculators ◦ Banks invested depositors’ money in the stock market ◦ Banks did not insure people’s money in 1929 and 1930 ◦ Bank Run – takes place when many depositors decide to withdraw their money at one time

7.  The Uneven Distribution of Wealth ◦ Overproduction due to machinery in factories ◦ Manufacturing out put per person per hour was 32% increase ◦ Worker’s wages only increased 8% ◦ During the 1920s people bought items on installment plans  Pay in small amounts monthly ◦ People lost their jobs due to the chain reaction

8.  The Loss of Export Sales ◦ Most of the world was also experiencing a recession so they were not interested in buying goods from the US ◦ Hawley-Smoot Tariff – Raised the average tariff rate to the highest level in American history  Other countries raised their tariffs so fewer American products were sold overseas

9.  Mistakes by the Federal Reserves ◦ Instead of raising interest rates to stop the speculation they kept the rates low  By keeping interest rates low it enabled banks to make risky loans  Low interest rates allowed people to think the economy was still going strong ◦ The Federal Reserves raised interest rates which tightened credit ◦ The Great Depression is HERE!!