Causes of the Great Depression

1. Troubles of the 30s Causes of the Great Depression

2. The Stock Market Plunges • People who bought stocks on margin (on credit with 10% down) were now being asked to pay brokers the money they still owed. • On Tuesday, October 29, 1929 a stampede of stock selling hit the New York Stock Exchange causing what is known as Black Tuesday. • As people sold their stocks the prices plunged and there were no buyers for the stocks.

3. Business Troubles • Overproduction led business into trouble. • During the prosperity of the 1920s, factories and farmers produced large amounts of goods. • As wages stayed the same and prices of products rose, average Americans could not afford to purchase these new goods. • Since factories had too many goods and too few buyers, orders slowed and factories were now forced to lay off workers.

4. Banking Troubles • Banks invested in the stock market • When the stock market crashed, the banks lost its depositors money. • In addition, borrowers could not repay their loans and without the money from the loans, the banks could not give depositors their money. • This forced more than 5,000 banks to close between 1929 and 1932 causing people to lose their savings.

5. Cycle of Disaster • The stock market crash triggered one disaster after another. • For example, the stock market crash ruined many investors. Without money from investors, businesses could no longer grow and expand. • As the banks began to get in trouble, businesses could not ask for loans. • Without capital from the banks, businesses had to cut back on production causing lay offs, wage cuts and even factory closings. • With unemployment so high, the number of people buying goods dropped causing even more factories to close. • In the end, many businesses went bankrupt and many people were left without jobs. • In addition, high tariffs on American made goods strangled international trade.