The Causes of

1
The Causes of the Great Depression
2
The Great Depression Introduction

• Who was involved? Key figures
• Herbert Hoover-President when the depression
  started
• Franklin Delano Roosevelt (FDR)-succeeded Hoover,
  credited with ending the depression
• What was it?
• Period in American history of economic downfall
• 1 out of every 4 Americans were unemployed
• Gross National Product (GNP) was cut in half from
  104 billion to 59 billion
• Almost half of the banks closed
• Where did it occur?
• Began in New York with the Stock Market Crash
• Spread across America and the world
• When did it happen?
• Black Tuesday October 29, 1929 to aboutend date
  is debated upon by historians
• Why is it important?
• The Great Depression will change fundamentally
  the role of government in the lives of Americans.
  

3
Objective

• Students will be able to analyze the causes of
  the Great Depression by completing a storyboard.

4
The Postwar Economic Boom

• What do you see here?
• What message does the billboard send?
• Describe the area surrounding the billboard.
• When do you think the billboard was created?
• What irony is there in this photograph?

5

• The Post War Economic Boom
• Twenties Prosperity
• During the 1920s, Americans believed that poverty
  in the US would be eliminated.
• Due to increased earnings, many Americans had
  more money to spend on luxury goods such as a
  radios and cars.
• By 1929, the US Stock Market was at an all time
  high, over 1.1 billion shares of stock was
  traded.

6
The Depression Foreshadowed

• By late 1929, problems began to surface.
  Unemployment was on the rise, farmers were losing
  their land, and stock prices were dropping.
• The number of Americans living in poverty
  increased, and few people could afford luxury
  goods.
• On October 29, 1929 the stock market crashed.

7
Causes of the Great Depression

• 1.Republican laissez faire in domestic
• affairs
• 2. Stock speculation
• 3. Unregulated banking institutions
• 4. overproduction of goods
• 5. decline of farming industry
• 6. unequal distribution of wealth.

8
1 Republican Economic Policies

• What do you see here?
• These men are all conservative Republicans. With
  this in mind, how do you think they dealt with
  business?

9

• 1 Republican Economic Policies
• Domestic Economic Policies
• Republican Presidents Calvin Coolidge and Herbert
  Hoover believed in trickle down economics.
• They believed that economic policies that
  benefited business and the wealthy would
  eventually trickle down to average Americans.
• For example if the government gave taxes cuts to
  the wealthy they would invest that money into the
  economy for the benefit of all.
• However wealth did not trickle down.
• The wealthy spent the money on expanding their
  work facilities and saved it for themselves.

10
International Economic Policies

• After WWI, European countries were in debt to the
  U.S. and began to default on their loans.
• The U.S. placed high taxes on foreign goods to
  discourage Americans from buying their
  merchandise.
• This meant that European goods would not be sold
  here causing Europeans to lose more money and
  further default on their loans.

11
2 Real Estate and Stock Speculation

• Describe what you see.
• What building do you see?
• Who are the people on the ground? On the
  building?
• What does this represent about stockbrokers
  during this period?

12

• 2 Real Estate and Stock Speculation
• Unchecked Stock Market Speculation
• Speculation is when a person or organization
  makes a risky investment on the hopes of getting
  rich quick.
• Investors believed that the stock market would
  go up indefinitely and that companies profits
  would continue to rise.

13
Unchecked Stock Market Speculation

• Investors speculated which companies stocks
  would rise and then bought large amounts of
  stock.
• They would then turn around and sell the stock
  for higher price, making a quick easy profit.
• The value of a companys stock became
  artificially inflated and did not correlate to
  the companies actual worth.

14
Unchecked Stock Market Speculation

• Stock analysts began to predict the market was
  headed for a fall.
• They warned that stock prices could not continue
  to rise at such an inflated rate and that the
  prices were exceeding the stocks actual worth.

15
3 The Stock Market Crash and the Banking
Industry Collapse

• What do you see here?
• Where is this occurring?
• What are the people doing?

16
Film Clip Black Tuesday
17

• 3 The Stock Market Crash and the Banking
  Industry Collapse
• The 1929 Stock Market Crash
• In late 1929 investors began selling their stock
  while they could still get a profit from them.
• As investors began selling, stock prices began to
  fall.
• On 10/29/29, or Black Tuesday investors flooded
  the NYSE with sell at any price orders.
• By the end of the day, investors lost 16
  billion.
• By Octobers end, the stock market was in ruins
  and the Great Depression had officially begun.

18
Unregulated Banking Institutions

• Banks collapsed because of the Republican policy
  of laisse faire and banks overextension of
  credit to stock investors.
• The government did not prevent banks from
  speculating depositors money on high risk
  ventures.

19
Unregulated Banking Institutions

• It did not also demand that banks keep a certain
  percentage of money on reserve and available.
• Therefore, when banks folded after the stock
  market crash, their customers had no way of
  getting their money.

20
Unregulated Banking Institutions

• Banks permitted investors to buy stocks on large
  margins of credit.
• For example, if an investor wanted to buy 20,000
  worth of stock, he only had to put up 10 (2,000)
  of his money.
• The bank would then loan the remaining 90 or
  18,000.
• The bank would seize the stock if they could not
  repay the loan as if it were theirs.
• Banking officials thought that stocks were good
  as money and would not go down.

21
(No Transcript)
22

• The Banking Industry Collapse Results
• Families that played the stock market lost all
  their money.
• Investors who had bought stocks on margin had to
  sell them at a fraction of their original price.
• This meant that they could not pay the bank the
  amount it had loaned to him.
• This meant that the bank could not replace its
  own money, which it had used to fund the
  speculators loans.
• So, even people who didnt invest in the stock
  market lost their money.
• Unemployment increased which meant that people
  began to default on their mortgages.
• This meant that banks lost even more money.
• By 1932, 1/4 of the nations banks closed.

23
Pair-Share

• The bank is failing. How do you think the
  depositors trying to get their money are feeling?
• How do you think the bank failures affected the
  nation?

24
Slide 4 Overproduction

• Describe what you see.
• Why are they doing this?
• How might the economic collapse be explained by
  what you see in these two pictures?

25

• 4 Overproduction
• Industrial Goods
• Consumer demands for goods was higher after WWI.
  Americans wanted to enjoy life after the horrors
  of WWI.
• Advertisements enticed Americans to purchase more
  and more goods.
• As a result, business owners continued to flood
  the market with huge supply of goods.
• By 1929, there were more products available than
  people to buy them.

26
(No Transcript)
27
4 Overproduction

• Agricultural Goods
• Americans farmers prospered during WWI because
  they provided food to the U.S. and Europe.
• After the war, farmers mechanized farming
  techniques to increase production .
• However, Europe did not need American food
  anymore resulting in an overproduction of crops.
• Farmers were stuck with a surplus crops they
  could not sell, or could only sell for a low
  price.

28

• 5 The Toll on the Farming Industry
• The Farming Industry Decline
• During the 1920s, farmers borrowed heavily from
  banks to pay for new equipment.
• When farmers could not sell their crops, they
  could not pay their loans.
• Farmers defaulted on their loans and they lost
  their farms to bank foreclosures.
• The banks would then try to sell the farm, but
  there were few that could afford to buy it.
• This meant that the bank lost even more money.

29

• 5 The Toll on the Farming Industry
• The Dust Bowl
• A severe drought caused the soil to turn into
  dust.
• Farmers and their families fled the Dust Bowl and
  headed west to California in search of
  employment.
• People referred to these as migrants farmers as
  Okies.
• Unable to pay for adequate housing, the Okies
  were forced to live in shacks.

30
5 The Toll on the Farming Industry

• Describe what you see.
• Why are there no people in the picture?
• Why did they leave? Where did they go?

31
Pair-Share

• One reason the Dust Bowl occurred was
  _____________________.
• As a result, _________________________.
• A cause of the Dust Bowl was ______________.
• For this reason, __________________.
• Because of the _________ many ______ _______.
• An effect of the dust storms was ______.
• Consequently when the dust storms came ________.

32
Slide 6 Unequal Distributions of Wealth

• Describe what you see.
• Where do you think they are going?
• How is their life different from the doorman?
• How would the gap between the rich and the poor
  contribute to the economic collapse of the 1920s?

33
(No Transcript)
34

• 6 Unequal Distributions of Wealth
• The Gap Between the Rich and Poor
• During the 1920s, the gap grew wider and
  distribution of wealth grew unequal.
• In 1929, 1 of the population owned 59 of the
  nations wealth.
• 60 of U.S. families lived on or below the
  poverty line. Workers struggled to survive in the
  1920s.
• Companies replaced workers with machines that
  produced goods faster and cheaper.
• Corporations rarely passed profits onto the
  workers with higher wages.
• Instead they kept wages low and used the money to
  improve their facilities.

35

• 6 Unequal Distributions of Wealth
• Purchasing Power is Lost.
• Banks and business tried to encourage consumer
  spending by allowing people to buy things on
  credit.
• But Americans fell deeper and deeper into debt as
  they purchased items they couldnt afford and
  paid the high interest on them.
• By 1929, Americans could not afford basic
  necessities let alone luxury goods.
• A small handful of wealthy Americans could not
  fill in the gap for the entire nation.
• Sales dropped and companies began to fail.