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Great Depression 7.2?SSUSH17 Analyze the causes and consequences of the Great Depression.a. Describe the causes, including overproduction, underconsumption, and stock market speculation, that led to the stock market crash of 1929 and the Great Depression.Causes of the Great DepressionRepublican Herbert Hoover became president in 1929. Although not as conservative as Coolidge, Hoover also opposed too much government interference in business. Unfortunately for Hoover, he took office at a time when the US economy was about to collapse. On October 29, 1929, a date known as Black Tuesday, the stock market crashed! Prices dropped drastically. Many who bought stock on speculation or invested by buying on the margin lost everything. Others were financially ruined as brokers and banks began to call in loans that people had no money to pay. The disaster marked the beginning of the Great Depression. The Great Depression lasted for more than a decade and remains the greatest economic crisis in US history.Who was the President of the United States in 1929?Did Hoover believe it was the governments job to interfere with businesses? When was Black Tuesday? What happened on Black Tuesday? 4. How long did the Great Depression last?Causes of the Great DepressionWhile many European nations suffered a post-World War I recession, the United States did not. American businesses, farms, and banks profited greatly during World War I by selling products to European markets. However, by 1929, the economic boom for the United States was over and the Great Depression began. There are numerous causes that together led to the severity of the Great Depression. The causes of the Great Depression were: 1. Industrial overproduction- Industries increased their productive capacity to produce and sell more goods. As a result, a supply surplus was created. This problem became exacerbated by Europe's struggling post-war market. The European countries could not buy as much American made product due to their own financial difficulties. The United States had more goods than consumers. 2. Consumer overspending/Underconsumption - With cash to spend after the war, Americans went on a spending spree in the 20’s. The development of the national consumer market in the United States and the advent of consumer credit further encouraged spending. After the Stock Market collapse in October 1929, consumers quit spending except for absolute necessities, creating a surplus of goods in the market place. This caused Under-consumption, which deepened the economic slowdown. 3. "Get rich quick" attitudes – Investors, many of them average Americans, sought to maximize their wealth through speculation (risky investments) in real estate and the stock market. To obtain money for expansion, companies began to offer more shares of stock for sale. Seeing growing demand for stock translate into growing value of stock shares, speculators began to buy and sell stocks quickly to profit from the rising market. Buyers were allowed to borrow money to purchase stocks with as little as 10% down. This practice of using loans to buy stock was called “buying on margin”. The gamble for buyers paid off as long as stock prices continued to rise. When the prices fell, these stock buyers were in debt to their stockbrokers with no way to pay off what they owed. Eventually, the speculators began to sell off stock to make profits and touched off a run on selling. The large numbers of stocks sold at the same time led to the Stock Market Crash of October 1929. 4. Disparity in Wealth- While many Americans prospered during the 1920s, some economic sectors did not. Farmers lost income throughout the 1920s because European markets stopped buying American farm goods. Coal mining suffered as oil began to replace coal as a fuel. In general, workers' wages failed to keep pace with prices during the period. As a result, an unequal distribution of wealth developed. The richest 1% of the American population owned approximately 40% of the country's wealth. 5. Banking Panic- As unemployment increased, depositors began to withdraw more and more of their savings from their bank. Lacking sufficient reserves, banks were forced to call in loans, which in turn touched off a wave of bankruptcies. Unable to collect outstanding loans, banks began to fail. In all, 9,000 banks failed during the 1930s. Many people lost their life savings. The bank failures led to a demand for more cash in the economy, which contradicted the Federal Reserve policy of the era. The shortage of cash in circulation worsened the effects of the economic downturn. With all of these factors in play simultaneously, the Great Depression began and continued to get worse. A capitalist system naturally has dips in the economic cycle. However, the events of the 1920s (overproduction, under-consumption, and the Stock Market Crash) made the crisis far more severe than a normally occurring downturn.5. Identify: List and explain the 5 major causes of the Great Depression Causes Summary 6. Define: Overproduction 7. Define: Underconsumption 8. Define: Stock Market Speculation and Buying on Marginb. Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west.The DustbowlEventually, overproduction and the fall in prices that accompanies can seriously hurt producers, raise unemployment, and hurt the economy. One group that understood this better than anyone was farmers. Farmers did not enjoy the same prosperity as the rest of the country during the 1920s. From 1909 through the war years, farmers did well due to the high demand for their products. With the war over, however, times changed. New machinery, such as tractors, allowed farmers to produce far more. However, this resulted in overproduction and caused agricultural prices to drop drastically in the 1920s. Although Congress made attempts to pass bills designed to increase farm prices, they were vetoed by Coolidge (remember, Coolidge did not think government should interfere in the economy).As a result, the agricultural industry was unable to recover and many farms went into foreclosure. Eventually, over-production had devastating effects on the environment as well. In an attempt to take advantage of high demand for their products during WWI, mid-western farmers unknowingly stripped much of the land and left it damaged by poor farming techniques. This damage combined with?climate changes.?The climate change led to?massive droughts?(shortage of rain) left much of the mid-western soil extremely dry, exposed by a lack of crops, and easily swept away by high winds?(over-farming). These conditions served to create a disaster in the early 30s known as the Dust Bowl. The Dust Bowl was a series of storms that hit the Midwest (Texas, Kansas, Oklahoma), causing enormous clouds of dust to be created by the high winds. These black clouds would blanket farms, and even entire cities, as they destroyed areas and left them uninhabitable. The ruthless storms displaced hundreds of thousands of farmers, forcing them to become homeless migrants. Many of these homeless farmers migrated to the west coast (California, Oregon, Washington) in hopes of finding better farming opportunities.9. How did overproduction and the fall of prices hurt the economy? 10. Where farmers doing well during the World War I (the war years)? 11. What allowed farmers to produce more after the war? 12. What happened to agricultural prices as a result of farmer overproduction? 13. What did mid-western farmers do to their land after WWI? 14. Who did climate change impact mid-western farmers? 15. Identify: What two factors led to the Dust Bowl? a. ____________________________________________________ b. ____________________________________________________ 16. Identify: List three states that were affected by the Dust Bowl? c. ____________________________________________________ d. ____________________________________________________ e. ____________________________________________________ 17. Summarize: What was the result of the Dust Bowl??c. Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles.Document Analysis 1. . . Kentucky coal miners suffered perhaps the most. In Harlan County there were whole towns whose people had not a cent of income. They lived on dandelions and blackberries. The women washed clothes in soapweed suds. Dysentery bloated the stomachs of starving babies. Children were reported so famished they were chewing up their own hands. Miners tried to plant vegetables, but they were often so hungry that they ate them before they were ripe. On her first trip to the mountains, Eleanor Roosevelt saw a little boy trying to hide his pet rabbit. “He thinks we are not going to eat it,” his sister told her, “but we are.” In West Virginia, miners mobbed company stores demanding food. Mountain people, with no means to leave their homes, sometimes had to burn their last chairs and tables to keep warm. Local charity could not help in a place where everyone was destitute. . . . Source: Kentucky Coal Miner during Great Depression18. What did Harlan County people eat during the Great Depression? 19. What were the children of Harlan County eating during the Great Depression? 20. Why did the boy hide his rabbit from Eleanor Roosevelt? 21. Prediction: Did they eat the boy’s rabbit?Consequences of the Great DepressionFollowing the stock market crash of 1929, the US economy unraveled. People rushed in mass to withdraw money from banks, causing them to close. Back then, the government did not insure bank accounts. Therefore, if a bank closed and went out of business, anyone who had money in the bank lost all their savings. People stopped investing in the stock market, causing stock prices to fall even further. Wealthy families suddenly found themselves with nothing. At one point, roughly one out of every four US citizens did not have a job.?Widespread unemployment?led many people became homeless. Many people had to rely on soup kitchens and breadlines that provided food for the poor in order to have anything to eat. In larger cities, many of the homeless gathered together to live in homemade shacks. These makeshift villages came to be called?Hoovervilles, in reference to the president whom much of the nation blamed for its woes. As the United States approached the presidential election of 1932, many citizens felt hopeless and desperate. The nation needed leadership and direction.22. What happened to the banks during the Great Depression? 23. What happened to the people who had money in the banks? 24. What percentage of people were unemployed during the Great Depression? 25. Summarize: How did the Great Depression impact society? 26. Identify: What was the purpose of Hoovervilles? ................
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