Causes of the Great Depression

1
Causes of the Great Depression
2
Farming hardships
3
Farming Hardships

• Farm prices continue to drop despite the
  prosperity of the 20s-supply/demand
• Technology improves causing overproduction-supply/
  demand
• High interests rates and crushing debts lead to
  foreclosures
• Not much help from government during the
  20s-Fordney-McCumber Tariff Act
• Dust Bowl

4
Sick Industries

• Coal, cotton and wool
• The change to oil and new products like rayon
  cause massive layoffs and factory shutdowns in
  these industries-change in taste shifts
  supply/demand curves

5
Distribution of Wealth

• 1920s-war-time tax on wealthy eliminated
• Trickle-down economics-government believed that
  if the rich had more money to spend in the
  economy, the economy would grow and the results
  would trickle down to the lower and middle
  classes in the form of more jobs and higher wages
• Rich got richer/poor got poorer

6
Distribution of wealth

• Harding Coolidge-pro business
• the business of America is business
• By 1930, 200 corporations owned nearly half the
  nations corporate wealth
• 1923-1929 business profits increased 60, workers
  incomes grew only 10

7
Over production

• New technology allowed businesses and farmers to
  produce more goods at cheaper pricesassembly
  lines, machinery-supply curve shift
• Smaller factories and farms couldnt afford to
  compete and closed
• When Depression hit, no money to buy any of these
  products-new cars sat in lots, farmers burned
  their extra crops for warmth to save money on
  heating costs

8
Dependence on Credit

• With the increased prosperity of the 20s
  department and appliance stores and car dealers
  allowed people to buy on credit
• Depression hits, people unable to pay off credit
  bills, stores and car dealers lose large sums of
  money

9
Stock Market Crash

• Over-speculation-inflated stock prices
• Margin buying-purchase stocks with borrowed money
• Black Thursday
• Black Tuesday
• Result of borrowing money to buy shares resulted
  in about 8 billion worth of credit in the market
  rather than into productive industry

10
Stock Market Continued

• Share value of New York Stock Exchange before the
  crash87 billion, after the crash19 billion
• Stock losses would exceed the total cost of U.S.
  involvement in WWI
• Stock market crash did not lead to immediate
  Depression-the onset of the depression was more
  like a slow leak in an automobile tire than a
  sudden blowout (FDR an intimate history, Nathan
  Miller)

11
Unemployment
12
Unemployment

• Mass layoffs occurred-no money for people to buy
  products-supply/demand curve shifts-change in
  prices, change in income, change in expectations
• Farmers moved to cities to look for jobs that
  were not there
• At its height unemployment during the Great
  Depression reached 25 of the population17
  million people

13
Bank Failures

• With unemployment and the stock market crash
  people withdrew all their savings out of the
  banks
• Massive bank closures-1930-1932 over 5000 banks
  closed
• Bank deposits not insured-many people loss all
  their life savings

14
Global Economy

• Many nations still under weight of costs of WWI
• Many nations unable to pay back loans owed to the
  U.S.
• Foreign banks also crumbled, leading to problems
  with U.S. Banks
• Hawley-Smoot Tariff-highest tariff imposed in
  U.S. history

15
What might this picture represent?
16
Can this man help the U.S. through the Great
Depression?