THE GREAT DEPRESSION CAUSES OF THE GREAT DEPRESSION

THE GREAT DEPRESSION

CAUSES OF THE GREAT DEPRESSION • The 1920’s were a decade of consumer spending & the economy looked healthy on the surface • Income did increase but there were some severe problems with the economy • October 1929: The “Roaring 20’s” came to an end and the Great Depression began……. .

WEAK INDUSTRIES & OVERPRODUCTION • Mass-production of consumer goods led to overproduction (because of WWI) • People did not need as many consumer goods and began buying less (under consumption) • Railroads, textiles, steel, coal mining, and construction were barely profitable • Demand for agricultural products declines • Too much food leads to a drop in crop prices • Farmers can’t afford to pay back loans and their farms foreclosed

CREDIT • Many Americans used easy credit to live beyond their means • They generated large debts • Companies could not collect the money from the items they sold on credit • Americans cut back on spending

UNEVEN DIVISION OF WEALTH • Despite rising wages, the gap between the rich & poor grew wider in the 1920’s • 70% of Americans were considered “poor” • Most of the spending was done by 30% of the population

THE STOCK MARKET • In the 1920’s the stock market soared and people speculated with stocks • Many people borrowed money to pay for stocks, called buying on margin • There was no regulation of the market & some companies altered stock values to raise profits • October 29 th, 1929 (Black Tuesday) the stock market crashed • Black Tuesday – You. Tube video

THE STOCK MARKET CONT. • People rushed to banks, prices plummeted, and investors lost $30 billion • Speculators who bought on the margin could not pay off their debts • Many lost their savings

BANK FAILURES • After the crash, people tried to withdraw their money from banks – “Run on the Banks” • 600 banks failed due to lack of funds and the inability to recoup loans • The failure of the banks left many Americans without their life savings

FOREIGN TRADE • Post-War debts in Europe and high protective tariffs in the US limited international trade • The Great Depression led to a global depression in Europe, Asia, & Latin America • World trade fell by 40%

CONSUMER CONFIDENCE • Millions of Americans lost their jobs or took pay cuts to keep their jobs • The lack of confidence in the future kept people from spending money • The lack of spending made the depression drag on until the 1940’s

EFFECTS OF THE GREAT DEPRESSION • Led to a collapse of the US financial system • 25, 000 banks and 90, 000 businesses failed by 1933 • Unemployment peaked at 25% • Many Americans lost their homes • America had record poverty & suicide rates; fathers abandoned families; healthcare declined (many children died of malnutrition) • Private charities created soup kitchens and breadlines to help

THE DUST BOWL • The effects of the Great Depression were made worse by the Dust Bowl: • Heavy droughts & over farming in the West destroyed the Plains • In the early 1930’s, windstorms swept away loose soil • Farmers in the Plains left their farms & searched for work or better land in the West coast states

PRESIDENT HOOVER’S RESPONSE TO THE GREAT DEPRESSION • President Hoover initially rejected bold gov’t action • He tried to reassure Americans that prosperity would return • He called for volunteerism & “rugged individualism” – Americans need to work • He eventually called for more gov’t action: • Relief checks to help the unemployed • The Reconstruction Finance Corps (RFC) loaned money to businesses • Created building projects like Hoover Dam • These efforts did not end the depression and many citizens lost faith in Hoover • Americans who lost their homes lived in shantytowns nicknamed “Hoovervilles”

HOOVERVILLES • Hoovervilles – You. Tube video

SOME LONG-TERM EFFECTS • Many Americans became more thrifty (saving things instead of throwing away). • Many started savings accounts for the first time. • Many stopped putting so much on credit. • Many became leery of the Stock Market.