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SSUSH17. Analyze the causes and consequences of the Great Depression. 17a: Describe the causes, including overproduction underconsumption , and stock market speculation that led to the stock market crash of 1929 and the Great Depression.
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SSUSH17 Analyze the causes and consequences of the Great Depression
17a: Describe the causes, including overproduction underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression • Under the presidency of Calvin Coolidge, the US practiced laissez-faire economics which allowed the people to do what they wanted because there was no government involvement in the market • Americans began to make high risk gambles on the stock market called speculation---guessing which stocks would spike for them to make a great deal of money
17a Continued • Americans also used a practice called buying on the margin, investors would buy stocks for only a small part of what they cost and borrow the rest of the money on a loan • The idea behind this is they would make enough money to pay off the interest on the loan and then profit the rest---when the stock market crashed, many people went into debt because this plan failed
17a Continued • Consumerism also took over as many people began to spend more money than they saved • With new technology, businesses could now make goods faster than ever. So fast that people could not buy them fast enough. This leads to Overproduction which would make the price of goods do what? • When consumers stopped buying goods, this became known as Underconsumption
17a Cont • When overproduction and underconsumption is combined, this leads to companies taking big losses and having to lay people off of work and leads to a rise in the unemployment rate
17b Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west. • One group who was not experiencing the success that others were having in the 1920s were farmers. • After the war, prices on farm goods dropped significantly. Congress tried to help farmers out, but President Coolidge vetoed the bills because he did not want the government to interfere.
17b cont • Because of bad farming habits that tremendously damaged the soil in the midwest, as well as severe drought, much of the ground in the midwest was extremely dry • High winds created a disaster called the Dust Bowl over much of this area that would blanket farms with clouds of dirt and dust
17c Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles. • Republican Herbert Hoover replaced Coolidge as President in 1929. Hoover also believed the government should stay out of economics, and this was not good for the American people. • Hoover took office at a time when the market was in bad shape and on October 29, 1929 the stock market crashed. This day became known as Black Tuesday
17c cont • When this happened, people who had gambled on the stock market lost everything. The farmers were already broke because of the dust bowl. The Great Depression had begun • Banks closed as people would literally run to the bank to get their money out. So much money was withdrawn from banks, that the banks had to close because they went bankrupt themselves
17c cont • Stocks fell even further as people did not have the money to invest in the stock market • The unemployment rate was at 25% (one out of four people did not have jobs). Many people became homeless. Others had to depend on breadlines and soup kitchens for food • Homemade villages were made with people living in cardboard boxes called Hoovervilles
