Download The Republican Presidents of the 1920s and the Causes of the

Aim #63: What were the causes of the Great
Depression?
Do now! On a separate sheet of paper, explain what
you believe was the most significant cause of the Great
Depression based on the last night’s reading
I HOPE NOT 
1. Overproduction and
Disparity in Wealth
2) Failed Monetary
Policy
Causes of the Great
Depression
3) Stock Market
4) Political Decisions
(I) The Great Depression Begins
a. Stock market Crash (Black Tuesday)
1. Buying on margin: investors only required to
put down 10-20% of the stock’s price in cash
and borrow the rest
2. Dependent on
Borrowed $
3. Wiped out
Investors
More than $20
Billion in market
value wiped out
After the crash, people
tried to withdraw their
money from banks
When banks could
not produce money
for all their customers,
the banks failed
This led to a run on
banks across the U.S…
hundreds of banks
failed and thousands of
people lost their savings
The banking failure and
stock market crash led
to the collapse of
thousands of businesses
(II) Causes of the Great Depression
a.
1.
b.
1.
2.
Overproduction in both agriculture and industry
Nation produced more goods than consumed
uneven distribution of wealth
workers’ wages did not increase enough
Most families lived below the poverty line (more than
60% of the nation’s families earned less than $2,000 a
year
Distribution of Wealth in the
1920s
* An income of $2,500 per
year was considered the
minimum
amount needed for a decent
standard of living
Causes of the Great Depression
Year the
depression
began
c. International economic problems
1. War reparations, war debts and high tariffs all
contributed to the problems
d. Too much reliance on credit
1. Installment plan over-stimulated consumer
buying
2. Defaults on loans and bank failures
Increasing American debts
Many Americans used credit to live
beyond their means, generate large
debts, and had to cut back on
spending by the end of the decade
e. Failed Economic policy
1. The Federal Reserve was supposed to serve as a
protective “watchdog” of the nation’s economy
2. In the 1920’s, the Fed encouraged buying on credit by
lowering interest rates which led to more borrowing by
Americans
f. Poor Political Decisions
1. Conservative economic policy: Laissez faire, let the
market right itself without government intervention
2. main belief: private charities, churches, state and local
governments provide relief and assistance to the poor,
not the Federal Government
BUT…Most of these were ill equipped to deal with the
number of people in need
g. Depression of American Farms
1. Farm prices dropped since WWI
2. Strapped with long term debts and high taxes
3. Farmers defaults on their debts
The Great Depression led to a collapse
of the American financial system by 1933
Americans lost
confidence in banks
as 25,000 banks
failed; The lack of
banking meant there
was no money for
investment
The lack of spending
and stock market
crash led to failure of
90,000 businesses
Unemployment
peaked at 25% of all
Americans; People
lost their homes,
farms, and businesses
The USA had record
poverty and suicide
rates and healthcare
declined; Charities
offered soup kitchens
and breadlines to help