1. The Great Depression
Causes

2. Process it!
Underline or Highlight key words and phrases for each cause
Create an illustration that highlights a key idea for each cause

3. Think of the US economy as a water wheel..
More water (money)= faster and more efficient the wheel goes (economy)
Less water (money) = the wheel (economy) moves at a slow, sluggish rate
NO water(money) = the water wheel STOPS moving(economic depression)
Question: Where did the money go? Why did it “dry up”?
There are SIX main reasons….

4. Use Both Sides of Your Notebook!
Directions: Draw a water wheel like the one below. Write “Causes of the Great Depression” at the center of the wheel.
Draw SIX spokes coming from the wheel

6. #1. Real Estate and Stock Speculation
Speculation: A risky investment in the hope of making a quick, large profit
Get rich fast fever
CA and Florida “land boom”-land sold for far higher prices than true worth
Stocks became artificially inflated (by Sept1929, stock prices were 400% higher than they were in 1925

7. The water for the wheel seemed plentiful but it was just an illusion…

8. #2. Government Economic Policies
Coolidge and Hoover supported Laissez Faire and Trickle Down
Loans – The Dawes Plan: US loans Germany $2.5 billion to pay back Britain and France from WWI. Britain and France turn around and pay us…
Tariffs – Hawley Smoot tariff: Congress raises taxes on foreign goods sold in US. World responds by raising taxes on American goods.
World trade drops by %40

9. Less money coming in
from abroad meant less money
for our water wheel!!

10. #3. Overproduction of Goods
Industry- mass production led to a surplus in the supply and people couldn’t afford to buy
Agriculture – improved farming technology meant that more products produced than needed
Less foreign demand for American products
Businesses and farmers struggle…therefore
less money for our water wheel!

11. #4. Collapse of Stock Market and Banking Industry
By 1927, many Americans invested in the stock market with the hope of making big $$
Use of buying margin grows (pay only part of the price for the stock; borrow the rest from a broker, then pay them back when you sell)
By Sept 1929 stocks were so inflated that cautious investors started selling…prices began to drop
By October 1929, investors were panicking and trying to unload their stock
October 29, 1929 BLACK TUESDAY..orders to sell at any price million shares were sold. Fortunes were lost in a matter of hours

13. cause #4 continued.. The Bank Run
Stock market crash forces people to take their cash out of the banks
This causes banks to call in the loans they had out
Many people could not pay their mortgages, so the banks literally ran out of money
From over 5,000 banks failed

14. No more cash; no more savings
People have nothing…and the
water is almost gone..the
wheel is barely moving

15. #5. Decline of Farming Industry
1/3 of the nation were farmers
Farmers were already in debt to pay for expensive machinery
Overproduction also ruined the land, causing Dust Bowl (sever dust storm from Texas to Dakotas)
Btw 1930 and 1934, one million American farms were lost. Many families came west seeking work (Okies)

17. 6. Unequal Distribution of Wealth
1% had 59% of US wealth
By 1932…
Unemployment rate 25%
Nine million families lost all of their savings
273,000 families lost their homes
The average American no longer made enough money to buy a car
Corporate profits dropped from $10 billion to just $1 billion in 1929