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Causes of the Great Depression

Causes of the Great Depression . US History: Spiconardi . Underlying Causes . Declining Demand Industries like coaling, the railroads, and textiles (clothing) saw steady declines in demand Economy didn’t suffer at first, as the automobile and construction industries carried the economy

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Causes of the Great Depression

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  1. Causes of the Great Depression US History: Spiconardi

  2. Underlying Causes • Declining Demand • Industries like coaling, the railroads, and textiles (clothing) saw steady declines in demand • Economy didn’t suffer at first, as the automobile and construction industries carried the economy • By 1926,construction spending dips $2 billion dollars • How many homes does one need? How many plants does a company need? • By 1929, automobile industry experiences a 33% drop in sales • How long does a car last? How many did consumers need to own in the 1920s?

  3. Underlying Causes • Why the decline in demand? • Distribution of Income • In the 1920s, the rich grew richer. Middle – and lower-income America experienced a slight growth in wages. • The average American saw a 9% increase in disposable income • The wealthiest 1% of Americans saw a 75% increase in disposable income. • Wealthy Americans invested their income in the stock market • The majority of Americans didn’t have enough disposable income to continue purchasing radios, cars, etc.

  4. Underlying Causes • Overproduction • Despite most Americans not buying consumer goods, factories kept producing more than there was a demand for. • Due to underconsumption • No funds to build new plants or hire new workers. • In order to cut monetary losses, companies had to lay off workers • Do you see why centering your economy around consumerism is risky?

  5. Underlying Causes • “The Era of Excess” • During the Roaring Twenties, Americans developed new habits • Consumerism • Leisure and Entertainment • Reliance on the automobile • Flapper lifestyle • When the roar the 1920s was silenced, and the bubble of prosperity popped, Americans found it difficult to modify the lifestyle they had grown accustomed • Americans were ill-equipped to handle life with the inability to afford excess, not to mention the stock market crash & bank failures

  6. Summary • What are three underlying causes of the Great Depression? • Based on these causes, do you think the current economic climate in America could turn into a depression? Tomorrow: The Stock Market Crash & Banking Crisis

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