1. The Great Depression Economic Disaster (1929-1941)
Causes…

2. Overspeculation on stocks and buying on margin

3. The Stock Market Crash
The summer of 1929 many thought the stock market boom might end and started selling stock
By October more were selling
Stock prices fell
Those who had bought on margin were asked to put up the money
Instead they sold their stock

4. The Stock Market Crash cont.
Prices dropped more
Black Tuesday-October 29, 1929-a wild stampede of selling
Prices crashed until their were no buyers for the stock
Many lost fortunes

5. Poor Banking Practices which lead to collapse of the banking system (The Federal Reserve did not act)

6. Bank Failures
In the 1920s banks loaned large sums of money to investors
When the stock market crashed investors (borrowers) couldn’t repay loans (they defaulted)
Banks couldn’t give depositors their money when they came to withdraw
Banks were forced to close
(5,000 between 1929 and
1932)
Many lost their life savings

7. High Tariffs on imported goods

8. Tariffs on Imports
U.S. was charging high tariffs on imported goods to reduce competition with American factories
This practice discouraged international trade
Not only did it prevent Americans from buying cheap foreign goods but it reduced the foreign demand for American factory made goods which were in great supply.

9. Overproduction of goods on farms and in factories

10. Overproduction
Farms and factories produced more goods than people could buy
Wages did not rise as much as prices in the 1920s
Workers couldn’t afford to buy all of the goods being produced

11. Downward Trend to Depression
Stock Market crash ruined investors, therefore businesses couldn’t grow and expand
Banks closed so businesses couldn’t borrow money
Factories cut wages or made layoffs
Unemployed workers didn’t have much money to spend.

12. Continued Downward Trend
Workers bought less, therefore the demand for goods dropped
More businesses went bankrupt
And on, and on, and on … … …