Causes of the Great Depression It is more than just the stock market crash.
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Transcript of Causes of the Great Depression It is more than just the stock market crash.
Causes of the Great Causes of the Great DepressionDepression
It is more than just the stock market crashIt is more than just the stock market crash
1. Stock Market crash❖ steady decline in value of stocks in Oct of 1929,
crashed at the end of the month and continued to decline until 1932
❖ Black Monday, Oct 28th - loss of 13%
❖ Black Tuesday, Oct 29th - loss of 12%
❖ crash is a cause, but also a reflection of larger problems in the economy
Stock Market Crash
Stock Market Crash
❖ Examples of decrease in the value of some stocks
Sept. 3, 1929 Nov 3, 1929
$182 $86 American Can$396 $168 General Electric$139 $49 Montgomery Ward
Stock Market Crash
❖ Stock Market/Economics 101 reminder
❖ More people buy stocks - prices go
❖ More people sell stocks - prices go
❖ When EVERYONE PANICS and decides to sell at the same time, stocks go way, way down
UP
DOWN
II. Unrealistic Expectations
❖ “American Dream” of consumer society
❖ post-World War I optimism
❖ the economy can only go up, stocks can only rise (uneducated investors)
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III. Speculation❖ people bought things with “credit”
❖ Ford’s installment buying
❖ stocks: buying on “margin” - investors borrowed $ to bet
❖ stock you buy = $50 (borrow) - stock goes up to $100, you sell that
stock to another - pay back bank and keep $50 suckerstock you buy = $50 (borrow) - stock goes down to $30, you have to
sell that stock and you still owe the bank $20 making you the sucker
IV. Unequal distribution of wealth
❖ Although there was a growth of the middle class, there was still a gap between rich and poor
V. Bank Failures❖ “bank runs”
❖ as people lost confidence, they went to the bank to remove their money, but it was not there - because $$$ banks had be loaned out
❖ as banks needed money, they collected debts from other places like houses and farms
VI. Overproduction
❖ Both factories and farms were more efficient, more productive in the 1920’s as technology increased
❖ demand increased during and after the war as the people wanted more stuff; however, by the late 1920’s - supply exceeded demand
Overproduction on farms and Dust Bowl
❖ More food than people needed-seriously???
❖ Example: wheat farmers in Oklahoma (Russian Revolution) Farmers borrowed to start new farms, felt they had to continue to increase crop production to pay debts
• People start on new life (head to California, etc.)
Overproduction in factories❖ More finished products than people were willing to
buy
❖ Example: Model T Fords Ford continued to make cars, but demand decreased
VII. Tariffs❖ isolationist attitude - rejection of Treaty of
Versailles, nativism, Red Scare, immigration restrictions
❖ tariff = tax on imports, led to decrease of imports and exports
❖ 1923 Fordney-McCumber
❖ 1930 Smoot-Hawley, considered a major cause of making America’s problems