1. Causes of the Great Depression

2. False Sense of Security
Farming suffered
Gross National Product (GNP) increased by 30% (in 1920s) because rapid growth > optimism
Unemployment low (~3%) because companies had to keep up with demand

3. Stock Market Place where stocks are bought & sold
Stock: ownership in company > sold in shares
So buying shares of stock = buying a piece of the corporation
In the 1920s, overall value of stocks quadrupled
More ordinary Americans began investing in stocks
Why is this important?

4. Business & Gov’t
Prosperity of 1920s reflected success of Presidents Harding & Coolidge’s pro-big business policies
“The chief business of the
American people is business.”
Coolidge
Term for no gov’t intervention in business or “hands off” is…

5. Election of 1928 Candidate Herbert Hoover Al Smith Party Republican
Democrat
Characteristics
Quiet, shy, business-like
Outgoing, natural politician
Religion
Quaker
Catholic = 1st time
Stance on prohibition
Supports prohibition
Supports alcohol sales

7. Economic Factors of Depression
Poor Distribution of wealth
Wealthiest 1% income grew 60% while rest only 8%)
1929, 70% of families income below standard of living
Credit
Buy on margin (pay in installments)
Investors used credit to purchase stocks > risky

8. Credit Example
If I want to buy 100 shares of Company A at $10 per share, it would cost $1000.
If I pay $500 and borrow $500 from a stockbroker, I plan to pay off the stockbroker when I sell the stock.
What happens if the value of the stock increases?
What happens if the value of the stock decreases?
Like the housing market a few years ago.

9. Economic Factors cont. Federal Reserve Credit dried up >
Created in 1913 under Pres. Wilson (bank for gov’t)
Nation’s central bank made it harder to get loans after concern with stocks & buying on margin >
Credit dried up >
Consumer spending decreased >
Industries struggled

10. What is the irony of this advertisement?
What do you notice about this picture? What impact do you think that had on society?

11. Video clip: Question to consider
(causes of the Great Depression)
Question to consider
Discuss the vulnerabilities in the 1920s economy

12. Financial Factors of Depression
Stock market heavily used in mid-1920s
Speculation in stocks increased
Margin buying encouraged by Federal Reserve policies
Stock prices > unrealistic levels
Stock market crash
Black Tuesday
(Oct. 29, 1929)

13.
Explain the impact of the 1929 Stock Market Crash

14. Effects of the Crash On individuals
Almost all suffered; lost savings; > debt
On banks
Depositors withdrew $; lost $ from stocks & loans; 1933 – 5,000 banks closed
On businesses
Blow to struggling businesses because banks cut off & consumers cut back; 1930 Americans saw wages drop by $4 billion; 3 million Americans lost jobs

16. Overseas Effects Depression spread throughout Europe
Still recovering from WWI
American banks called in loans
Foreign businesses laid off workers
Gov’t (including U.S.) passed high tariffs to protect industries
Ex. Smoot-Hawley Tariff

17. Short Answer Response
Of the causes of the Great Depression discussed above, which ONE do you think was most significant and WHY?