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The Great Depression: Causes and Effects

The Great Depression was caused by a combination of factors including disparity of incomes, buying on credit, farm overproduction, laissez-faire policies, lowered taxes, stock market speculation, and disagreements within the Federal Reserve. The stock market crash of 1929 signaled the start of the Great Depression, during which unemployment rose to 25% and people lost their homes, savings, and means of supporting themselves. The effects on individuals and families were severe, with many relying on soup kitchens and bread lines until U.S. involvement in World War II helped stimulate economic recovery.

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19 views14 pages

The Great Depression: Causes and Effects

The Great Depression was caused by a combination of factors including disparity of incomes, buying on credit, farm overproduction, laissez-faire policies, lowered taxes, stock market speculation, and disagreements within the Federal Reserve. The stock market crash of 1929 signaled the start of the Great Depression, during which unemployment rose to 25% and people lost their homes, savings, and means of supporting themselves. The effects on individuals and families were severe, with many relying on soup kitchens and bread lines until U.S. involvement in World War II helped stimulate economic recovery.

Uploaded by

Shabir
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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The Great Depression:

Causes and Effects


.
Black Tuesday

❖ Stock Market Crash October


29, 1929

❖ Signals the start of the Great


Depression

❖ *Only WWII gets America out


of the Great Depression, not
New Deal
Causes of the Great
Depression
❖ 1. Disparity of Incomes

❖ 2. Buying on Credit

❖ 3. Farm Economy Collapse

❖ 4. laissez-faire policy and the end of Progressivism

❖ 5. Taxes

❖ 6. Stock Market Speculation

❖ 7. Federal Reserve
1. Disparity of income
❖ Roaring 20’s: good times; high
employment and no inflation

❖ However, Gap between rich and poor


was very large

❖ Majority of workers lived below


poverty line ($2500 in 1929)

❖ Companies were making lots of


money, but did not share this with
their employees
2. Buying on Credit
❖ At some point creditors will stop
giving people credit

❖ Consumers cannot buy anymore

❖ Drop in consumer spending = lay-


offs

❖ Layoffs = less spending, which then


= more lay-offs
3. Farm Economy
❖ farmers produce too much

❖ farm prices fall

❖ farmers produce more to keep up

❖ prices fall even more

❖ farmers cannot pay their loans, default

❖ defaulting puts banks out of business


4. laissez-faire policy and the
End of Progressivism
❖ Big Business allowed to do whatever they
want - laissez-faire

❖ tariff raised on foreign goods to help


protect US industry

❖ child labor and minimum wage


overturned

❖ Is this an end of Progressivism? Who


does the tariff hurt?
5. Taxes
❖ taxes on the wealthy are slashed

❖ so who is paying taxes to the government?

❖ Wealthy spend money on luxury items, not items


produced by the common factory worker

❖ Or the tax money saved was put in the stock


market rather than their companies (R&D,
factories, or workers), so why give a tax break?

❖ **then the companies saw the excess inventories


and started pulling money out of the Market**
6. Stock Market Speculation

❖ “get rich quick”

❖ buy on margin - investor allowed to


borrow the money to buy stocks now

❖ People had to sell, which drove the price


down even further

❖ Black Tuesday - some wealthy tried to


prop up the Stock Market, but to no avail
7. Federal Reserve
❖ charged low interest and
businesses would borrow - goes
to workers who buy products

❖ charge high interest people don’t


borrow - discouraged lending

❖ differences of opinion also


existed about whether to help
and how much assistance to
extend to financial institutions
Government to the aid
❖ 1. because of influence of Big Business the Government
issues a tariff - which made goods high

❖ other Countries can’t sell their goods in America and


therefore cannot buy American

❖ Also impose their own tariff on American goods

❖ 2. President Hoover urges companies to voluntarily


maintain wages and hours - companies do the opposite
Impact on the People
❖ 25% Unemployment

❖ People lost their homes - took to


the streets

❖ People that still had jobs had their


hours and wages cut

❖ People only bought necessities -


further led to lay-offs

❖ “Runs” on banks

❖ people fear losing money and


take all their money out of
banks
Images

❖ Soup Kitchens

❖ Bread Lines

❖ Hoovervilles

❖ Dust Bowls

❖ Okies

❖ Bonus Army
People
❖ people undernourished
❖ schools closed
❖ Abandonment increases – Men leave
families for work or shame
❖ Suicide rate increases sharply
❖ birthrate fell –
❖ Men no longer the head of the
household
❖ People looked to the government for
help

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