1. Standard and Objective
SSHS-S1C8-01-a
Strand 1: American History
Concept 8: Great Depression and World War I
P.O. 1: Describe causes and consequences of the Great Depression
economic causes of the Depression
Students will comprehend the economic causes of the Great Depression by identifying three major financial events of the 1920s.

2. The Causes of the Great Depression
1929

3. Alfred E. Smith Democratic nominee Governor of New York
Roman Catholic?!

4. Herbert Hoover Republican nominee Secretary of commerce
Former head of the Food Administration
Quaker

5. The Election 1928 Herbert Hoover v Alfred E. Smith
Protestants thought the Catholic Church was financing Smith’s campaign and would have much influence if he won
Hoover won by a landslide
444-87

6. Religions of Presidents

7. Stock Market Soars
“I have no fears for the future of our country, it is bright with hope.” -Herbert Hoover’s Inaugural Address
10% of American households owned stocks
Buyers engages in speculation
Investors bought on a margin

8. The Great Crash October 24th 1929, Black Thursday
Black Tuesday -More than 16 million shares were sold and the of the industrial index went down 10%
By mid-November $30 billion was lost -roughly equal to total wages Americans had earned in 1929

9. Banks close Banks lent billions to stock speculators
Many banks invested depositors money in the stock market
When the market crashed banks lost investments and speculators defaulted on their loans
Banks severely cut back on their loans

10. What is a run on the bank?
Some banks closed and there was no insurance on bank deposits so customers lost all of their money
If it seemed like the bank might fail, depositors would make runs on the bank taking out all of the money they had
Banks don’t hold all of their depositors money at the actual bank so this would cause the bank to fail

11. Roots of the Great Depression
The amount of credit Americans took out in the 20s
Buying items on installment plans
Overproduction
5% of Americans earned 30% of the nation’s income
⅔ of Americans barely made enough money to live
Companies had to lay off workers and families had no back-up plan

12. Loss of Export Sales
Hoover tried to lower tariffs so businesses and farmers could sell their wares overseas
Congress instead enacted the highest tariff ever called the Hawley-Smoot Tariff
Other countries didn’t want to trade with America in response leading to even lower sales

13. Mistakes by the Federal Reserve
Didn’t raise interest rates to curb risky speculation
By doing this, the board encouraged member banks to make risky loans
It also led business leaders to think that the economy was still expanding
Led to overproduction when sales were falling
When the depression hit, the Federal Reserve raised interest rates, tightening credit and continuing the downward spiral

14. A Little Context The Weimar Republic Hyperinflation
What do you think the picture to the right shows?

15. Exponential Growth $1 was equal to $1,000,000,000,000
Money was used as wallpaper
Menu price could be 5,000 Marks for a cup of coffee. You could have two cups and when the bill came, it would be for 14,000 Marks.

16. Let’s Review
What economic choices caused the economy to become unstable in the late 1920s?
How did the stock market crash trigger a chain of events that led to the Depression?