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![Unchecked Stock Market Speculation
• “Virtual feeding frenzy” of buying and selling =
value of a company’s stock was deceiving
• Crooked investors look for a quick profit
• Hoover: “Possible hard time [are] coming.”](https://image.slidesharecdn.com/causesofthegreatdepressionpowerpoint-120806164105-phpapp02/75/Causes-of-the-Great-Depression-Powerpoint-10-2048.jpg)
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Causes of the Great Depression Powerpoint
- 1. Causes of theGreat Depression (America’s Economic Collapse 1929-1941)
- 2. Prosperity in the1920s Seemingly unlimited growth, opportunity, and achievement •Nation’s income 43% ($61-87B) •Technology = production 1929 •Stock market at all-time high Dow Jones Average 1921 1932
- 3. The Depression Foreshadowed • Rising unemployment • Farmers losing farms • Stock prices dropping • More impoverished Americans = fewer products sold
- 4. Stock Market 101 •Pay the current stock price to buy one or more shares of ‘stock’ • ‘Stock’ is partial ownership of a corporation • If others want to buy that stock, it becomes more valuable • If others do not, it loses value • “Buy low, sell high!” • Once you sell your stock, you get cash. Until you sell, you have a piece of paper!
- 5. October 29, 1929 “Sell!! Sell!! Sell!! Sell!! Sell!! Sell!! Sell!! Sell!!
- 6. Long-Term Causes ofthe Great Depression • Republican domestic and international economic policies • Stock and real estate speculation • Unregulated banking practices • Overproduction of goods • Decline of the farming industry • Unequal distribution of wealth • THE STOCK MARKET CRASH ALONE DID NOT CAUSE THE GREAT DEPRESSION!!
- 7. Conservative Domestic EconomicPolicies • “The business of America is business.” – Laissez-faire • ‘Trickle-down economics’ • Cut government expenditures, lower taxes on rich, higher Herbert Hoover taxes on middle and lower (1929-1933) classes Calvin Coolidge (1923-1929) Increased production = who will buy all this stuff!! Rich get richer ; Workers suffer! Purchase machines = who needs workers?? Rich use tax breaks to spend on themselves = wages low
- 8. Conservative International EconomicPolicies • European nations owe U.S.A. billions!! • US refusal to forgive or reduce debts • US lends more $$$ so they can pay us back • Tariffs (import taxes) keep Americans buying American goods Dawes Plan
- 9. Real Estate Speculation •“Speculation”– make a risky investment in the hope to “GET RICH QUICK!” • California-Real estate boom goes bust (building permits 25%) • Florida-scams and fraudulent practices doom investors
- 10. Unchecked Stock MarketSpeculation • “Virtual feeding frenzy” of buying and selling = value of a company’s stock was deceiving • Crooked investors look for a quick profit • Hoover: “Possible hard time [are] coming.”
- 11. The 1929 StockMarket Crash! • Analysts warn of an end to the ‘bull market’ (in which prices are constantly rising) • Investors begin to sell stock prices fall companies reduced production • Fortunes lost in a day – Investors lose $4B on the 28th and $16B on the 29th
- 12. Unregulated Banking Institutions •Stock market crash The government that governs best, governs least! collapse of banking industry • Republican’s ‘laissez-faire’ in the 1920s (speculation, no reserves, uninsured $) • Banks’ over-extension of credit to stock investors and brokers (buying on margin) Pay 10% now and the bank fronts the other 90%- your stock is your collateral!
- 13. Banking Industry Collapse •Families lose savings in crash; banks have little cash left on reserve • Banks lose money loaned to ‘buy on the margin’ (even people who did not invest lost out!) • People default on mortgages due to unemployment By 1932, ¼ of banks had closed (6000 banks)
- 14. Overproduction of Industrialand Agricultural Goods
- 15. Overproduction of IndustrialGoods • Technological advances change how Americans live and work • In the Roaring 1920s: – Consumer demand is very high – Machine produce quality products quickly – Unrestricted capitalism • By 1929, supply greatly exceeds demand!
- 16. Overproduction of AgriculturalGoods • American farmers had prospered during WWI • Use profits to buy machines to produce more • After WWI, demand drops surplus! – Huge supply + Low demand = Low prices
- 17. Farming Industry Decline • Farmers borrowed from bank to buy machinery • Foreclosed on mortgages and other debts • Banks closed due to defaults and stock market • Between 1929 and 1933 farmers’ income 50% • One million families lose their farms by 1934
- 18. The Dust Bowl Headingwest to California
- 20. Unequal Distribution ofWealth • Gap between the rich and poor widens in the 20s • By 1929 1% of Americans have 59% of the wealth • In the 1920s average American’s wages 9% • In the 1920s income of rich 75%! • Wealth DOES NOT ‘trickle down’ • Consumers in debt ; Cannot afford products Demand drops Companies fail! Unemployment!
- 21. •Failure of ‘Trickle-DownEconomics •Decline in international commerce •Overvaluation of stocks Great •Ill-advised banking practices Depression •Overproduction of goods 1929-1941 •Collapse of agriculture industry •Unequal distribution of wealth