The Great Depression and New Deal (1929–1940). Causes of Great Depression. Even though the economy in 1920s seemed strong, the prosperity hid a number of growing problems. There were three main causes of the Great Depression: Government policies (laissez faire)
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Businesses and Workers
Overall U.S. production plummets.
Investors lose millions.
Businesses and workers cannot repay bank loans.
Consumer spending drops.
U.S. investors have little or no money to invest.
Allies cannot pay debts to United States.
Businesses lose profits.
Businesses cut investment and production Some fail.
Savings accounts are wiped out.
Banks run out of money and fail.
Workers are laid off.
Europeans cannot afford American goods.
U.S. investments in Germany decline.
Bank runs occur.
German war payments to Allies fall off.Effects of the “Great Crash”
Source: Historical Statistics of the United States, Colonial Times to 1970
Factories and Farms OVERPRODUCING!
Banks have NO $, people lost their savings and jobs, and their was no one to HELP!
Factories Fire Workers (Have No $)
Farm Prices fall (Have no $)
Banks close because they have no money: Loans have not been paid back, can’t give people their savings
Farmers & Factory Workers can’t pay back loans to Banks: DEFAULT!!
Banks have no money to give people
People Default on Loans
People Loose savings
--Herbert Hoover, 1930