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Who Was to Blame?Causes of the Great Depression1. Banking and Investing SectorBy 1929, 4 million people (3%) owned stock People were buying stocks “on margin”Stock prices skyrocketed (speculation) but when prices fell there were more buyers than sellersBanks spent the 1920’s making risky loansBanks invested depositors money in the stock market, when the market crashes, depositors lost their savingsMany banks closed (659 in 1929 and a6,000 in 1933 - causing more people to lose their money) By the middle of November, 1929 investors had lost $30 billionNot the only cause of the Depression but it quickened the collapse of the US & world economiesStock market crash on Oct 29th, 1929 “Black Tuesday”, not a “cause” of the Depression but a symptom of all the above, it quickened the collapse of the US & world economies2. Business SectorBusinesses and farmers were producing more than people could buy by end of the 1920’sLoss of foreign buyers of agricultural and industrial products due to global Depression from WWISurplus: Caused prices to drop dramatically To save $$$ businesses had to lower wages and/or cut jobs which led to unemployment and more povertyOverproduction3. Government SectorFederal Reserve Bank kept interest rates low during the 20s causing banks to make risky loans Did not regulate business or industrylaissez faire government policytax cuts, less government funding available4. Household (Consumer) SectorMany Americans were in severe debt from buying on credit or installment purchasingAs incomes fell, people bought fewer products (under consumption)Jobless workers could not buy anythingFor these reasons, sales dropped even more contributing to more people losing their jobsMost of America’s wealth was in the hands of very few peopleIn 1929, the top 5% of American households controlled 30% of the wealth – bottom 40% controlled 10% of the wealth (inequality)Most Americans did not have enough disposable income to buy any more goods5. Foreign SectorsTariffsHigh US tariffs caused European countries to not trade with USHawley-Smoot Tariff in 1930 raised interest rates to the highest level to protect US businessesOther countries still in depressions from WWIAPUSH Only: Intro Paragraph and Thesis PracticeDirections: In the space below, after reviewing the Causes of the Great Depression, write a 3-4 sentence intro paragraph, ending with a one sentence thesis answering the following prompt. Include at least 2 categories in your thesis.PROMPT: Analyze the causes of the Great Depression and evaluate the factors leading to a “bust” in the economy.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ ................
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