1. Today’s Question
1. What were the four (4) major causes of the Great Depression

2. Causes of the Great Depression
Farming
Unequal Distribution of Wealth
Stock Speculation
Buying on Margin
And other important factors

3. Industries Struggling industries at the end of the ’20s Agriculture
Railroad
Textile mills
Mining

5. Industries
Improved inventions and processes (like the assembly line) increased efficiency and helped businesses produce more goods
Middle-class and poor couldn’t afford the extra goods so products piled up in warehouses
If businesses can’t sell their stuff, they can’t pay their bills
Materials
Equipment
Shipping
Salaries

8. Industries
By 1929, 71% of American families earned less than $2,500 per year (unequal distribution of wealth)
$2,500 minimum for decent living
Consumers used credit (installment buying) to get things they wanted or needed
When people’s debt got higher than they could repay, they stopped buying new items
More goods piled up

10. The Stock Market
Americans bought stock on speculation and margin because of the extra money from war bonds and low interest loan rates.
Speculation is buying and selling stocks in hopes of making a quick profit.
Buying on margin is paying a small part of the stock’s price as a down payment and borrowing the rest of the money then paying the loan after selling the stock
If stock prices fell, they couldn’t repay the loan since they had to sell the stock for less than they paid for it

11. The Stock Market September 3, 1929
stocks on the NY Stock Exchange reach high point
October 24, 1929 – stock prices drop (Black Thursday)
People try to sell stocks at the best price before their value drops any lower
People who bought on margin forced to sell to pay loans
Prices fell even lower because more people wanted to sell stocks than buy them
The quickly falling prices scared off buyers
A record 12.9 million stocks traded
Starts the Crash of 1929
Black Tuesday (October 29, 1929)
Investors sold 16.4 million shares of stocks at prices much lower than they had sold a month earlier

12. Banks
Banks demanded people pay back money they had borrowed to buy stocks
When people couldn’t repay the loans, the banks ran short of money
People got scared and went to withdraw their savings from the banks
The problem is banks don’t keep enough cash on hand to pay all of their depositors at once
Banks that couldn’t pay closed down
9,000 banks closed by March 1933

13. Fear and Unemployment
Scared people stopped buying new goods so businesses sold less and less
Tens of thousands of businesses went bankrupt or fired workers
Unemployed people bought fewer goods and companies laid off more workers
Unemployed people lost their homes and went hungry since they couldn’t pay their bills

14. President Herbert Hoover
Like many other Americans, he feared government interference might hurt the economy even more
Hoover’s solutions
Tried balancing the budget
Cut government spending
Raised taxes
These “fixes” pulled money out of the economy and made things worse

15. President Herbert Hoover
Believed federal relief (aid to the poor) would make people too dependant on the government
Believed “rugged individualism” would get Americans through
Americans blamed Hoover for
Unemployment
Hunger
Homelessness
“Hoover flags” and “Hoovervilles”

16. President Herbert Hoover
Finally approved public works projects
A federal agency to lend money to states, cities, and towns to build roads and dams
Created jobs