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• Causes of the Great Depression
– Election of 1928
– 31st President: Herbert Hoover (1929-1933)
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• Stock Market Soars
– “Bull Market”
• A long period of rising stock prices
– “Margin”
• Buying stock with little money down
– “Margin Call”
• Demand the investor pay back loan immediately
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• Causes of the Great Depression
– “Speculation” (cause #1)
• Betting the market will decline or rise
• Way to make money quickly
• People ‘bet’ the market would continue to rise in 1920’s
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• The Stock Market Crash (1929)
– Market ran out of new “buyers” (cause #2)
• No “new money” to support the Bull Market
– Oct 21: “margin call”
• Stock Market falls
– Oct 24: “Black Thursday” – market falls further
– Oct 29: “Black Tuesday”
– Mid-November: 30 billion dollars lost
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• Causes of the Great Depression
• Many banks failed after crash
– Lent money to speculators
– Banks Invested in Stock Market
– “Bank Run” (cause #3)
• Many depositors decide to withdraw all their money at
one time
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• Causes of the Great Depression
– Uneven distribution of income Manufacturing
output rose 32%
• Workers wages only rose 8%
– Less disposable income to buy goods
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• Causes of the Great Depression
– Loss of Export Sales (Cause #4)
• Hawley-Smoot Tariff
– Raised tariffs (taxes) on imported goods
– Foreign countries do the same
– American business unable to sell many goods overseas
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• Causes of the Great Depression
– Mistakes by the Federal Reserve
• Failed to raise interest rates on loans (Cause #5)
– Would have stopped speculation
– Encouraged banks to issue risky loans
• Low interest rates made economy look healthy
• Raised interest rates too late
– No access to loans; tight credit