Causes of The Great Depression. Hoover Elected President Election of 1928 takes place during...
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![Page 1: Causes of The Great Depression. Hoover Elected President Election of 1928 takes place during prosperity –Hoover runs campaign on Republicans prosperity.](https://reader033.fdocuments.in/reader033/viewer/2022051416/56649e415503460f94b3316c/html5/thumbnails/1.jpg)
Causes of The Great Depression
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Hoover Elected President
• Election of 1928 takes place during prosperity– Hoover runs campaign on Republicans
prosperity record of the 1920’s• Wins by landslide (444 to 87 electoral votes)• Next Republican to win Presidency will be in 1952
as a result.
– Hoover is blamed for the Great Depression• Why doesn’t Hoover do anything?
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Leading Causes of Depression• Industries don’t reinvest profits into
new machinery• Farmers overproduce as Europe
recovers from the War. Ag. Prices plummet by 40%
• Unequal distribution of income, too much money in the hands of too few people.
• Easy Credit, buy now pay later. What happens when the job market fails?
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Economic Troubles on the Horizon
• Economic prosperity in the 20’s lead to overproduction in many areas– People live on credit
• Average American earns less than $1,500 yr.
– Businesses overproduce• Need to find ways to sell products• Business encourages people to pile up credit.
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Farmers Overproduce
• Excess supply leads to price drop• 27% of Americans farm
– Loss of farm income reduces demand for other products
– Factories start to lay off workers
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Farm Production
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Uneven Distribution of Income
• Income of top 1% of population income grows 75%
• Bottom 40% of population income grows 9%– Most people did not have the income to buy
what factories produced.
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Unequal Distribution of Income
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Stock Market Crashes
• After WWI stock market takes off.– Many Americans rush to buy stocks– Speculators inflate prices beyond reason– Many buy on margin (borrow to buy stock)– September 29 stock prices start to decline
• Confidence waivers• Speculators start to pull out
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October 29, 1929
• Black Tuesday– Bottom falls out of
market– Record 16 million
shares sold that day– Millions of shares
offered for sale aren’t even bought
– $30 billion lost
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Industry doesn’t reinvest Profits• Become uncompetitive to foreign
companies. As a result of the war, foreign factories are most modern in the world.
• Lose business to foreigners
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Factories lay off workersMany men go on the road in search of work. Can’t find it and many towns pass laws against vagrancy.
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Banks fail
• 650 banks fail in 1929• 6,000 fail by 1933
– Savings are wiped out• No FDIC Insurance.
– Banks stop lending to Americans and Europeans.
– Panic spreads to the rest of the World.
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Bank Run
• http://www.youtube.com/watch?v=qu2uJWSZkck&feature=player_embedded
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Great Depression Spreads to the Rest of the World
• As a result of the Depression, American cuts back on imports• Hurts other nations economies• They cannot import American goods as a
result
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Protectionism• Tariffs and restrictions on imports limit
international trade• Hawley-Smoot Tariff
• Congress passed the highest tariff in American History
• Europe cannot pay off it’s debt without trade
• Factories in Europe have same problems as American factories, lay off workers
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American Statistics
• 25% of labor force out of work
• Whole industries fail• Banks fail• People embarrassed to
ask for assistance, independent in nature
• American government does little to help• Laisse fairre
economics, no gov’t interference in the economy.
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British Statistics
• 25% unemployment• Government insists
on balancing the budget, a bad move at this time
• Went off gold standard – Devalued the pound
Cut government workers pay
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Germany• Foreign trade falls 75%• 33% unemployment• Withdraw of US loans
create depression• Government owned bank
fails – France lets bank fail to
destroy union with Austria
• Led to unstable government, rise of Hitler