Today

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Todays Question

• 1. What were the four (4) major causes of the
  Great Depression

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Causes of the Great Depression

• Farming
• Unequal Distribution of Wealth
• Stock Speculation
• Buying on Margin
• And other important factors

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Industries

• Struggling industries at the end of the 20s
• Agriculture
• Railroad
• Textile mills
• Mining

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Industries

• Improved inventions and processes (like the
  assembly line) increased efficiency and helped
  businesses produce more goods
• Middle-class and poor couldnt afford the extra
  goods so products piled up in warehouses
• If businesses cant sell their stuff, they cant
  pay their bills
• Materials
• Equipment
• Shipping
• Salaries

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Industries

• By 1929, 71 of American families earned less
  than 2,500 per year (unequal distribution of
  wealth)
• 2,500 minimum for decent living
• Consumers used credit (installment buying) to get
  things they wanted or needed
• When peoples debt got higher than they could
  repay, they stopped buying new items
• More goods piled up

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The Stock Market

• Americans bought stock on speculation and margin
  because of the extra money from war bonds and low
  interest loan rates.
• Speculation is buying and selling stocks in hopes
  of making a quick profit.
• Buying on margin is paying a small part of the
  stocks price as a down payment and borrowing the
  rest of the money then paying the loan after
  selling the stock
• If stock prices fell, they couldnt repay the
  loan since they had to sell the stock for less
  than they paid for it

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The Stock Market

• September 3, 1929
• stocks on the NY Stock Exchange reach high point
• October 24, 1929 stock prices drop (Black
  Thursday)
• People try to sell stocks at the best price
  before their value drops any lower
• People who bought on margin forced to sell to pay
  loans
• Prices fell even lower because more people wanted
  to sell stocks than buy them
• The quickly falling prices scared off buyers
• A record 12.9 million stocks traded
• Starts the Crash of 1929
• Black Tuesday (October 29, 1929)
• Investors sold 16.4 million shares of stocks at
  prices much lower than they had sold a month
  earlier

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Banks

• Banks demanded people pay back money they had
  borrowed to buy stocks
• When people couldnt repay the loans, the banks
  ran short of money
• People got scared and went to withdraw their
  savings from the banks
• The problem is banks dont keep enough cash on
  hand to pay all of their depositors at once
• Banks that couldnt pay closed down
• 9,000 banks closed by March 1933

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Fear and Unemployment

• Scared people stopped buying new goods so
  businesses sold less and less
• Tens of thousands of businesses went bankrupt or
  fired workers
• Unemployed people bought fewer goods and
  companies laid off more workers
• Unemployed people lost their homes and went
  hungry since they couldnt pay their bills

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President Herbert Hoover

• Like many other Americans, he feared government
  interference might hurt the economy even more
• Hoovers solutions
• Tried balancing the budget
• Cut government spending
• Raised taxes
• These fixes pulled money out of the economy and
  made things worse

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President Herbert Hoover

• Believed federal relief (aid to the poor) would
  make people too dependant on the government
• Believed rugged individualism would get
  Americans through
• Americans blamed Hoover for
• Unemployment
• Hunger
• Homelessness
• Hoover flags and Hoovervilles

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President Herbert Hoover

• Finally approved public works projects
• A federal agency to lend money to states, cities,
  and towns to build roads and dams
• Created jobs