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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