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The Great Depression
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Business Cycle
Economic Prosperity
Falling Prices
Economic Depresstion
Rising Prices
Bull Market
Bear Market
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Bear Market: A general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism.
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Bull Market: An increasing investor confidence, and increased investing in anticipation of future price increases
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Causes of the Depression
• High Tariffs• Availability of Easy Credit• Over Production• Unequal Distribution of Income• Over speculation• Crisis in the farm sector
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High Tariffs
• Helped stifle world trade and hurt American businesses
• Prevented other countries from selling their goods in the US
• It prevented them securing the dollars that they needed to buy American products.
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Availability of Easy Credit
• In the 1920s people bought luxury items on credit paid for through installment plans allowing people to live beyond their means.
• Business was expanding and the federal government failed to control bank loans
• People were buying stock that had no value
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Over Production
• More goods were being produced than were selling (called stockpiling)
• Wages were rising more slowly than production and prices of goods.
• Credit concealed the fact that there was a decline in purchases.
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Unequal Distribution of Income
• If farmers had received better prices and workers had received higher wages the American people would have been able to purchase the surplus
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Over speculation
• Stocks were no longer being bought and sold on the bases of their current value
• They were being bought on the assumption that they would go UP & UP!
• Buying on the Margin: Borrowing money to help pay for the stock
• So if a stock declined people who had “bought on the margin” had no way to pay off the loan
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Crisis in the Farm Sector
• Farms were auctioned off when farmers could not pay their mortgages.
• Thousands of farmers lost their land
• However on plus on farms was farmers could grow food for their families unlike the cities
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Bank and Business Failure
• Not long after the stock market crashed millions of Americans who had never owned stocks were affected.
• Many people panicked and rushed the bank trying to
• Many banks began to close because they could not return depositors’ money
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Black Tuesday
• On October 29th 1929• The Bottom fell out of
the market.• Investors raced to sell
their stocks
• This signals the beginning of the GREAT DEPRESSION
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Hawley-Smoot Tariff
• Designed to protect American farmers but had the OPPOSITE effect
• The tariff prevented other countries from earning American currency to buy American goods.
• Farmers could no longer export goods to Europe thereby making unemployment worse.
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Worldwide Shock Waves
• As a result of the collapse of the American economic system it led to a worldwide depression.
• International trade slowed down as a result of the high protective tariffs – EX: The Smoot-Hawley
Tariff
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The Dust Bowl• Plowing had removed the thick protective layer of
prairie grasses. • Farmers exhausted the land through
overproduction of crops.
Areas that became known as the DUST BOWLKansas, Oklahoma, Texas, New Mexico, Colorado
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Every day men would set out from home and walk the streets in search of jobs. Some became so discouraged they simply stopped trying, some even abandoned their
families.
• During the Great Depression there was a drastic rise in the homeless: men who were laid off and lost their homes.
– Many became hobos: Men & Boys who rode the rails as they searched for work
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Mental and Physical Results
• Many people were physically and mentally impacted.– Their health declined as a result of poor diet and
anxiety• People were demoralized and lost their will to
survive• The Suicide rate rose more than 30• 3 times as many people were admitted to
state mental hospitals
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