Transcript Causes of the Great Depression

Today
I want you to understands the
causes Great Depression and the
causes of the crash of 1929.
 We are going to list and explain 14
causes of the Great Depression. You
will also need these for a later
assignment.
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Causes of the Great Depression
n
How did it happen?
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1. False Prosperity –there was overproduction in most goods,
60% of US population lived below poverty line, 5% of Americans
earned 33% of all wages.
2. Speculation – Easy credit made many Americans players in
the stock market. It made for a false sense of security.
3. Banking Crisis – 9000 banks closed in 1930, most Americans
lost their faith in the banking system, adding to the problem.
4. Unemployment – as high as 38% nationally…some cities
experienced unemp. As high as 80% .
5. Trade Collapse —Hawley-Smoot Tariff was at an all time
high, foreign countries responded accordingly.
6. The Stock market Crash —caused people to lose faith in “the
system.”
7. Hoarding money —further added to the Banks problems, and
in turn hurt the economy.
8. Government Policies- Hoover did not believe in direct aid to
the people. (think of our recent stimulus checks)
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9. The “Debt Problem.” – income and prices fell by as much as
25%. Americans carried a great deal of debt—which led to
decreased spending.
10. Ending the Gold Standard – at one time for every dollar in
circulation, there was a dollar of gold in federal reserve. creating
more money that wasn’t backed dollar for dollar caused inflation.
11. Uneven distribution of wealth.- The top 0.1% of
Americans had income equal to that of the bottom 42%. That
same 0.1% controlled 35% of savings, while 80% of Americans
had no savings at all. In 1928 Henry Ford reported an income of
$14 million, while the average income was $750.
12. To much reliance on the rich- the economy was dependant
on the luxury spending of the rich, when the economy looked like
it was turning for the worse, the rich not spending furthered the
problem.
13. Dependence on construction – the 20’s saw a lot of roads
being built for the new autos…once it cooled….
14. Large scale international debt —American banks and the
American Gov. loaned billions to foreign countries before and
during the great War—paying it back would further hurt their
countries.
Please Graph the Causes of the Depression
1
14
2
13
3
12
4
Causes
Of
The
Depression
11
5
10
6
9
7
8
The Great Depression in the City
and the Country
Identify Rural and Urban Characteristics,
And characteristics they shared.
Urban Experiences
Rural Experiences
Income
Gap
Business
Cycle
Consumer
Debt
The
Great
Depression
Banking
Crisis
Global
Depression
Today
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In understanding the Great Crash, we need to first
understand stocks.
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What is a stock?
A stock represent a share in the ownership of a company.
If you own a company's stock, then you are a owner, or
shareholder, of the company. A stock represents a claim
on the company's assets and profits.
In general, stocks reflect the long-term earnings potential
of companies …Coke…Nike…IBM
How the “Game” works
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Investors are attracted to stocks of
companies they expect will earn large
profits in the future; because many people
wish to buy stocks of such companies,
prices of these stocks tend to rise. On the
other hand, investors are reluctant to
purchase stocks of companies that face
poor earnings prospects; because fewer
people wish to buy and more wish to sell
these stocks, prices fall.
Today
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We will be going to the library to research
our current economy as compared to the
causes of the Great Depression.
You can use any means the internet will
give you, but ask.com will be your best
bet.
You may need to rephrase questions to
get to answers that you may need.
Be very specific.. don’t ask “What is our
unemployment rate?” but do ask “What
is the Unemployment rate in the United
States?”
Day One sample: Without borrowing
Name of
Stock Sold Price
Name of
Stock
Bought
Price
Gen.
Motor
$10
Held at
End of
day
Price
General
Motor
$10
No. of Total
Shares Cost
No. of
Shares
100
No. of
Shares
100
Margin
Loan
Total
Cost
Paid For
$1000
Cash
$1000
Borrowed
0
Total
Cash
Cash held
Borrowed on Margin
You did not borrow
$0.00
Cash on
Hand
You spent
All that
You had
Day One Sample: with borrowing on the Margin
Name of
Stock Sold Price
Name of
Stock
Bought
Price
No. of Total
Shares Cost
No. of
Shares
Total
Cost
Margin
Loan
Paid For
Cash
Cash held
Cash
$1000
Borrowed
$9,000
Total 10000
Gen.
Motor
$10
1000
Held at
End of
day
Price
No. of
Shares
Borrowed on Margin
Gen
Motor
$10
$1000
You borrowed $9000
$10000
$0.00
Cash on
Hand
$0.00
Day 1
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American Can
Amer. Tele &
Telegraph
General Electric
General Motor
US. Steel
RCA
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34 ¾
114 3/4
139 ¼
10
84 ¼
2½
Day 2
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AC
AT&T
GE
GM
USS
RCA
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73 ¼
123
182 ½
14 ¾
106 3/4
6¼
Day 3
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AC
AT&T
GE
GM
USS
RCA
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104 ¼
125 1/2
196 ½
15
94 ½
4¾
Day 4
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AC
AT&T
GE
GM
USS
RCA
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160
130 ½
320
65 1/2
122 3/4
66 3/4
Day 5
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AC
AT&T
GE
GM
RCA
USS
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292 ½
142 1/2
326
117 ½
126
77 3/4*
*Stock Split. Add one
share for each 5
shares of old stock
Day 6
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AC
AT&T
GE
GM
USS
RCA
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49*
149 1/2
83 3/4 **
153 ¾
157 1/4
61 1/2
* four for one split plus twoone old share becomes six
**Four for on split-one old
share becomes four.
Day 7
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Amer. Can
AT&T
GE
GM
USS
RCA
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75
178 1/2
135 ¾
138
151 3/4
101
Day 8
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Amer. Can
AT&T
GE
GM
USS
RCA
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110
193
221
203
151
420
1/4
½
¾
¼
Day 9
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AC
AT&T
GE
GM
USS
RCA
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181
335
396 ¼
181
279
101*
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*5 for one stock split-one old
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share becomes Five
Day 10
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AC
AT&T
GE
GM
USS
RCA
**Today is also
known as the
Great Stock Market
Crash
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86
197 ¼
168
36
150
28