1. Causes of the Great Depression
Chapter 9, Section 1

2. Election of 1928
Republican: Herbert Hoover
Democrat: Alfred E. Smith 

3. Bull Market Bull Market: Long period of rising stock prices.
Stock Market: System set up for buying and selling stocks.

4. Bull Market (cont.) Stock Market Problems:
Speculation: Taking risky bets that the market would continue to rise
Buying on Margin: Paying a small % of a stock’s price as a down payment and borrowing the rest (up to 75%).
Margin Call: Broker demand that an investor immediately repay a loan.

5. The Great Crash October 29, 1929 “Black Tuesday”
Stocks lost $10 - $15 Billion in value.
Was NOT a major cause of the Great Depression but it hurt America’s ability to deal with other problems.

6. The Great Crash (cont.) Banks: Loaned money to stock investors.
Invested depositors’ money hoping for higher return rates than normal loans.
1929: 659 banks closed
1933: 6,000 banks closed (25%)

7. Roots of the Great Depression
Uneven Distribution of Wealth
Half of all families earned less than $1,500 a year
The richest 5% of Americans had 1/3 of the nation’s wealth.
The poorest 40% of Americans had 1/10 of the nation’s wealth.

8. Roots of the Great Depression
Loss of Export Sales
Hawley-Smoot Tariff Act
Loss of overseas markets when America’s were struggling.

9. Roots of the Great Depression
Federal Reserve
Should have raised interest rates to slow down risky investing (speculation).
Instead: Kept interest rates low.
Encouraged speculation
Made businesses think the economy was still expanding = Took out more loans.
When the Depression hits: They RAISED rates.

10. Financial Collapse Gross National Product (GNP) Fell 50%
$104 billion down to $59 billion

11. Financial Collapse (cont.)
Unemployment
1929: 1.6 million (3% of population)
1933: 13 million (25% of population)