CAUSES OF THE
GREAT
DEPRESSION
Today’s Objective
◦ After today’s lesson, students will be able to…
◦ Explain the underlying economic factors and causes leading
up to the Great Depression
◦ Essential Skill
◦ State implications and consequences
Wrap Up and Reflection
◦ Who won?
◦ What did you take away from the game yesterday?
Dow Jones Industrial Average
Dow Jones Transportation Average
Dow Jones Utility Average
1920s Booming Economy
◦ Wages up 40% after WWI
◦ Stock Market was soaring
◦ Many people were investing – get rich quick schemes
◦ 1920s fad – get into the market
◦ America had emerged as a world economic, industrial, and
military power
Economic Danger Signs
◦ 200 businesses control 50% of the economy
◦ Why is this dangerous?
◦ Too much industry overproduction – surplus goods not being
purchased
◦ Too many products, not enough consumers buying
◦ 80% of population has no savings
More Economic Danger Signs
◦ Banks are uninsured
◦ No government agencies monitor banks or the Stock Market –
Laissez Faire/Republican Presidents
◦ Market value based on borrowed $ and over speculation instead
of real money
◦ Increase in personal debts – credit debt and installment plan debt
◦ Buying Stocks on Margin – borrowed money from Stock Broker to
purchase Stocks
The Warning Signs
◦ Farm prices drastically fall after WW1
◦ Farmers paid by government to make food for allies creates a huge surplus
◦ Farmers unable to repay loans after government pulls WWI agricultural
contracts
◦ 6,000 banks close out West
◦ President Hoover vetoes all bills to help farmers
◦ Laissez-Faire
Black Tuesday
◦ October 29th, 1929
◦ Stocks plunge again
◦ Value of market falls
◦ People sell what is left to get some $
◦ By the end of October, over $30 billion
has been lost
◦ Thousands lose everything
Stock Market Crash of 1929
Immediate Effects of the Crash
◦ Many lost life savings in the market crash
◦ Banks and Brokers call in loans – American people have no $
◦ Hundreds of banks close
◦ No $ to pay back loans = empty savings accounts
◦ Banks not prepared for people to withdrawal $ at the same time
◦ No bank insurance
◦ 9 million savings accounts vanish
Reasons for Stock Market Crash
◦ Buying stocks on _____
◦ Actual stock values increased/decreased by 1929
◦ In reality, the economy was growing/contracting
◦ Stocks became _____ when no one wanted them
◦ The market _____ on Tues. Oct. 29, 1929
◦ People ran to the ____ to withdraw their savings
◦ Banks ran out of funds because of too many _____
Why did it become the GREAT Depression
◦ “The Domino Effect”
◦ People lost their jobs after the stock market crashed. Therefore,
many needed to spend their savings
◦ When large numbers of people tried to take money out of the banks,
many banks went out of business because they did not have the
people’s money
◦ Because people had so little money, they bought few goods
Why did it become the GREAT Depression
◦ “The Domino Effect” Continued
◦ The producers could not sell what they made so they did NOT make
a profit
◦ Without a profit, factories could not pay their employees so the
factory workers lost their jobs
◦ When workers lost their jobs, they could not pay what they owed to
banks or businesses
◦ So more banks and more businesses began to fall.
World Wide Depression
◦ America’s intimate relationship with
Europe causes serious economic
troubles overseas and contributes to
a world wide depression
Causes of the Great Depression
◦ Look at the often cited causes of the Great Depression
◦ Work with your group to brainstorm possible solutions
◦ Discuss and decide whether the Great Depression could have
been prevented