Causes of the Stock

Market Crash of

1929

Depression: Period of severely reduced economic activity characterized by

rise in unemployment

1.Overproduction

Industry made more goods than most

consumers wanted or

could afford

2.Unequal distribution

of wealth:Company profits rose in 1920s but

wages were NOT increased as much Lack of

purchasing power

The rich got richer & the poor got poorer

Most $ in hands of few who saved rather than

bought

Overproduction

No purchasing power+

3.

Overextension of credit: Too much installment buying

BUY NOW!! Pay Later

4.

Economic troubles abroad

Banks don’t have the money to lend

to Europe any more.. Even with all the post war

problems

Highest tariff ever

Hawley-Smoot Tariff1930

Other countries raised tariffs as well & world

trade fell over 40%

Europe buys less U.S. goods (American companies make

less money)

+ Hawley-Smoot Tariff

Less $$$ going to Europe

Tax policies of Andrew Mellon: Rich people & corporations

were not paying as

much income tax

5.

6. Fear: Panic swept due to

market crash

7. Overspeculation:You buy stocks you THINKTHINK will rise in price

Example: Buying a stock in Apple BEFORE the

iPhone and iPods reached the market. That would have been a smart

investment!

8. Government PoliciesThere was not enough

$$$ in circulation to help economy

recover after the stock market crashed

3 Reasons for the stock market crash + 8 other American Factors THE GREAT DEPRESSION