2. Causes of the Great Depression U.S. History Mrs. Sadler 2007 U.S. History Mrs. Sadler 2007

3. 1. Overproduction  New goods  People couldn’t afford so bought on loan – installment plans  Example: eventually everyone had a radio but manufacturers kept production high  New goods  People couldn’t afford so bought on loan – installment plans  Example: eventually everyone had a radio but manufacturers kept production high

4. 2. Unequal Distribution of Wealth  The new machines enabled companies to lay off unskilled labor and make even larger profits.  Coolidge administration also decreased inheritance taxes.  Minimum wage was declared unconstitutional.  The new machines enabled companies to lay off unskilled labor and make even larger profits.  Coolidge administration also decreased inheritance taxes.  Minimum wage was declared unconstitutional.

5. 3. Easy Credit  The increase in manufacturing output created a surplus of goods.  Easy credit enabled the middle and lower class people to buy lots of consumer goods they really could not afford.  The increase in manufacturing output created a surplus of goods.  Easy credit enabled the middle and lower class people to buy lots of consumer goods they really could not afford.

6. Stock Market Speculation  Easy credit also enabled people to speculate and buy stocks with money they really did not have.  It's called buying on margin.  Easy credit also enabled people to speculate and buy stocks with money they really did not have.  It's called buying on margin.

7. Disaster Dow looses 89% of value

8. Government Mistakes  Hoover – thinks this is part of the normal business cycle.  Doesn’t act – belief in the individual and small government (laissez-faire)  By mid-term elections starts to lend money to business and banks – trickle down – some public works projects like Hoover Dam  Hoover – thinks this is part of the normal business cycle.  Doesn’t act – belief in the individual and small government (laissez-faire)  By mid-term elections starts to lend money to business and banks – trickle down – some public works projects like Hoover Dam

9. Federal Reserve  “The Fed” is the central banking system of the U.S. created in 1913.  Decides monetary policy - expand or contract money supply (interest rates)  1928 & 1929 tightened money supply to stop speculation ( credit)  Did not act as lender of last resort - allowed banks to fail  “The Fed” is the central banking system of the U.S. created in 1913.  Decides monetary policy - expand or contract money supply (interest rates)  1928 & 1929 tightened money supply to stop speculation ( credit)  Did not act as lender of last resort - allowed banks to fail

10. High Tariffs  Tax on imported goods (protects American manufacturers  Tariffs during 20s lead to trade wars which reduced exports and imports  Smoot-Hartley Act (1930) cut imports in 1/2 - reduced trade with Europe.  Tax on imported goods (protects American manufacturers  Tariffs during 20s lead to trade wars which reduced exports and imports  Smoot-Hartley Act (1930) cut imports in 1/2 - reduced trade with Europe.