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The Great Depression. Causes of the Great Depression. Stock Market Crash of 1929 $40 Billion dollars in stockholder money gone Led to decrease in confidence. Investors & businesses less likely to invest Banks had invested money in the stock market & lost it.

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The Great Depression

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causes of the great depression
Causes of the Great Depression
  • Stock Market Crash of 1929
    • $40 Billion dollars in stockholder money gone
    • Led to decrease in confidence.
      • Investors & businesses less likely to invest
      • Banks had invested money in the stock market & lost it
causes of the great depression1
Causes of the Great Depression

2. Lack of diversification in the economy

  • 1920’s prosperity depended largely on construction & automobile industry
  • Late 1920’s: construction & auto industries declining
  • Construction: 1926: $11 Billion  1929: $9 Billion
  • Automobiles: Decreases 33%
causes of the great depression2
Causes of the Great Depression

3. Extremely unequal distribution of wealth leads to overproduction.

  • Wages didn’t rise in proportion to manufacturing productivity (Manufacturing increases/consumption decreases)
  • 71% of Americans live on below $2,500 per year
    • Americans too poor to buy the goods American industry is producing

Americans stop purchasing  Businesses decrease production  Workers eliminated  Raising unemployment

causes of the great depression3
Causes of the Great Depression

4. Credit & Investment

  • Farmers heavily in debt to banks for land & equipment
    • Crop prices decrease (86%)  Farmers unable to repay loans  Farms foreclosed . . . Unemployed farmers
  • Investors who had “bought on margin”
    • Lenders “call in” loans . . . Investors go broke and default or lost investments
  • Banks investing deposits in the stock market
    • Loose money. Constrict credit. Bank runs. Bank failures
causes of the great depression4
Causes of the Great Depression

5. Destabilizing of American/European Trade

  • After WWI, Europe reliant on American agriculture & manufacturing. Part of reason for U.S. economic growth of 20’s.
  • European demand for American goods declines in late 1920’s.
    • European manufacturing & agriculture rebuilding
    • European economic troubles due to post-War debt
  • Hawley-Smoot Tariff (1930)
    • American protective tariff against foreign goods.
    • 33 foreign governments react by raising tariffs on U.S.
    • Fewer exports  fewer goods sold  decreased production Decreased profits  Rising unemployment
what happened to many banks
What happened to many banks?
  • Many banks “speculated” in the Stock Market in 1920’s (Invest w/depositors $)
  • After the Crash, some banks closed because they lost depositors savings in the 1929 Stock Market Crash.
  • Fear & uncertainty leads to . . . BANK RUNS
what is a bank run

Bank Run:

What is a Bank Run?

When a large number of people withdraw their money from a bank at the same time out of fear the bank will “go under”


1929 – 1933: 9,000 banks close

  • Depositors lost $2.5 Billion
  • Banks stopped lending money & calling in loans
what happened to farms
What happened to farms?
  • Many farmers in debt to banks for land & equipment
  • Price of agricultural goods decreases Decreased

income for farmers


Thousands of farmers unable to make payments to banks for land/equipment loans

  • 1933: 364,000 farms foreclosed on

To make matters worse . . .

The Dust Bowl

  • Irresponsible farming practices
  • Drought
  • Wind storms lead to dust storms
what happened to employment
What happened to employment?
  • As GDP fell, unemployment increased
  • 1930: 4.2 million unemployed (9%)
  • 1933:12.6 million unemployed (25%)
what was life like for the unemployed
What was life like for the unemployed?

“They hung around street corners and in groups. They gave each other solace. They were loath to go home because the were indicated, as if it were their fault for being unemployed. A jobless man was a lazy good-for-nothing. The women punished the men for not bringing home the bacon, by withholding themselves . . . The men suffered from depression . . . They were ashamed of themselves . . . They avoided home.” – Nathan Ackerman (Psychiatrist)

where did many homeless americans live
Where did many homeless Americans live?


Shantytowns of homeless built outside of cities . . . named after President Hoover

others became hoboes
Others became“Hoboes”
  • Unemployed (usually) men who

led a migrant lifestyle traveling

from town to town

on foot or railroad car

  • Estimated 2 million

men became hoboes

how did herbert hoover attempt to deal with the economy
How did Herbert Hoover attempt to deal with the economy?
  • Tried to restore public confidence in American economy
    • “The fundamental business of this country, that is, production & distribution of commodities is on a sound and prosperous basis.”


hoover the depression
Hoover & the Depression
  • Tried to stay inactive . . . Believed the government should keep “hands off” . . . Economy would fix itself
  • Tried to convince businessmen not to cut production or lay of workers
    • Could not stop the declining economy
hoover government spending
Hoover & Government Spending
  • Increased government spending & involvement to improve economy
    • Agriculture Marketing Act – Tried to help farmers maintain prices.
    • Funded construction of Boulder Dam (Hoover Dam) to provide electricity & clean water to western states.
    • Reconstruction Finance Reform – Emergency funding for banks
did hoover s succeed
Did Hoover’s succeed?
  • Many Americans blamed Hoover for the economic decline
  • Believed he was too aloof and inactive and that he should have been more active in trying to help Americans
  • Reforms generally helped banks