11:1 Causes of the Great Depression – Election of 1928 – 31 st President: Herbert Hoover...

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• Causes of the Great Depression– Election of 1928– 31st President: Herbert Hoover (1929-1933)

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• Stock Market Soars– “Bull Market”• A long period of rising stock prices

– “Margin”• Buying stock with little money down

– “Margin Call”• Demand the investor pay back loan immediately

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• Causes of the Great Depression– “Speculation” (cause #1)• Betting the market will decline or rise• Way to make money quickly• People ‘bet’ the market would continue to rise in 1920’s

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• The Stock Market Crash (1929)– Market ran out of new “buyers” (cause #2)• No “new money” to support the Bull Market

– Oct 21: “margin call”• Stock Market falls

– Oct 24: “Black Thursday” – market falls further– Oct 29: “Black Tuesday”– Mid-November: 30 billion dollars lost

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• Causes of the Great Depression• Many banks failed after crash

– Lent money to speculators– Banks Invested in Stock Market

– “Bank Run” (cause #3)• Many depositors decide to withdraw all their money at

one time

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• Causes of the Great Depression– Uneven distribution of income Manufacturing

output rose 32%• Workers wages only rose 8%

– Less disposable income to buy goods

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• Causes of the Great Depression– Loss of Export Sales (Cause #4)• Hawley-Smoot Tariff

– Raised tariffs (taxes) on imported goods– Foreign countries do the same– American business unable to sell many goods overseas

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• Causes of the Great Depression– Mistakes by the Federal Reserve• Failed to raise interest rates on loans (Cause #5)

– Would have stopped speculation– Encouraged banks to issue risky loans

• Low interest rates made economy look healthy• Raised interest rates too late

– No access to loans; tight credit