1. Causes of The Great Depression
18.1

2. Review What were some of the downsides to the 1920s?
1920s had been a time of prosperity
How so?
What were some of the downsides to the 1920s?
Leisure time, cars, movies, sports, radio, planes
Unequal rights, buying on credit-buy now, pay later

3. Election of 1928 Who is portrayed in this cartoon?
Based on the caption, what can we tell about this person?
Coolidge decided not to run for reelection

4. 1928 election Republicans nominated Herbert Hoover
Well-known to Americans
Had been Coolidge's Secretary of Commerce

5. 1928 election Democrats nominated Alfred E. Smith
He was a 4 time governor of NY
The first Roman Catholic to win a major party’s nomination for president

6. Smith’s beliefs became a campaign issue…
Protestants claimed the Catholic Church financed the Democrats
Believed they would rule the US if Smith were elected

7. 1928 election
Smith’s biggest challenge:
The prosperity of the 1920s
Republicans took full credit for this

8. 1928 election results Who won?
Notice Smith didn’t even win home state of NY
Hoover was from Iowa
Who won?

9. Herbert hoover

10. The stock market soars
Bull market= stock market experiences a long period of rising stock prices
Caused many people to invest in stocks
Began buying stocks on margin (making a small cash down payment)
Ie: Stock cost $10,000…down payment of 10%=$1,000
Where does the other $9,000 come from?
As a loan from a stockbroker
Have to pay stockbroker back eventually once you make some profit…so this is good if the stock prices keep rising, but what happens if they don’t?

11. To protect the loan, a stockbroker could issue a margin call, demanding the investor repay the loan at once
Buyers/investors began to engage in speculation, they bet the market would climb, allowing them to make money quickly
Investors were sensitive to any fall in stock prices. If prices fell, they had to sell quickly, or they wouldn’t be able to repay their loans

12. The great crash
Bull market could only last as long as investors kept putting money into it
By 1929, professional investors sensed danger
There weren’t any new customers
Prices slipped as they began to sell their holdings
Other investors sold shares to pay interest on their loans
Prices continues to fall

13. The stock market crash Black Tuesday- October 29, 1929
Stock prices took the steepest dive yet
Almost 16 million shares of stock were sold
Stock market lost between $10-15 billion in value
By mid-November, nearly $30 billion was lost
NOT the major cause of the Great Depression
Did undermine the economy’s ability to overcome other weaknesses

14. Black tuesday

15. Banks begin to close
Banks were forced to cut back on the loans they made
By 1929, they had invested depositors’ money in the market, hoping to get a higher return there than they could by using the money for loans
Consumers and businesses couldn’t borrow money
This led to a recession- slow down in economic activity

16. Many banks were forced to close
Customers lost their savings because the government did not insure bank deposits
Bank run= many depositors withdraw their money at one time out of fear that the bank will collapse
More than 10% of banks had closed by 1932

17. Bank failures

18. Roots of the great depression: uneven distribution of income
The top 5% of American households earned 30% of the nation’s income
2/3 of families earned less than $2,500 a year
Not everyone making consumer goods in factories could afford them

20. Roots of the great depression
Many Americans had purchased items like refrigerators and cars on the installment plan
Paying off such debts forced buyers to stop making new purchases
Decrease in sales employees being laid off
Chain reaction that put many people out of work
Ie: radio sales decreased…makers cut back on order for copper wire, wood cabinets, glass
Copper miners, carpenters, glass workers lost their jobs
Small down payment, then pay off rest in monthly installments

21. Roots of the depression: loss of export sales
Many jobs might have been saved if manufacturers sold goods abroad
Hawley-Smoot Tariff- raised the average tariff rate to the highest level in American history
Protected American farmers

22. Roots of the great depression: mistakes by the federal reserve
Federal Reserve Board failed to raise interest rates
By keeping rates low, companies kept borrowing money and expanding more than necessary
Led to overproduction when sales were falling
Companies had to lay off workers to cut costs