Main 6 causes of the Great Depression

1st cause

Republican Economic Policies

What were the Republican Economic Policies?

Laissez-faire, trickle down policy, and provided businesses and wealthy individuals with big tax cuts in hopes they would turn and invest in U.S. economy/help the less fortunate (they didn't)

What happened as a result of Republican Economic Policies?

Wealth didn't trickle down; corporations put their profits in expanding their work facilities, increasing production, and lining their own pockets; increased the gap btw. rich and poor

2nd cause

Real Estate and Stock Speculation

What is Real Estate Speculation?

Where a person or organization makes a risky land investment in the hope of making a quick profit

What is Stock Speculation?

Investors speculated which company's stock would rise -> then bought large quantities -> then turned around and sold the stock at higher prices -> then the new buyers turned and sold it for an even higher price

Result of stock speculation

The value of companies' stocks became artificially inflated

3rd cause

Stock Market Crash and the Banking Collapse

Stock Market Crash

October 29, 1929; October 28, 1929 - investors sold off more stocks at a loss of over $4 billion; October 29, 1929 - "Black Tuesday" - orders to sell at any price flooded the stock market, people lost fortunes in hours, by end of the day investors lost $16 billion

Banking Collapse

Investors who bought stock on margin couldn't sell their stocks at all, or forced to sell them for a fraction of the price; they had little or no money then to repay the bank so the bank couldn't replace its depositors' money

By what time did 1/4 of the nation's banks close?

1932

What was the banking collapse triggered by?

The Stock Market Crash

Factors of the banking collapse

Republican policy of laissez faire (leave alone); banks' over-extension of credit to stock investors and brokers; depositors' money was uninsured in banks

Result of banking collapse

Thousands of families became impoverished instantly

4th cause

Overproduction

Overproduction in the early 1900s

Increased consumerism led to increased production of a variety of consumer goods (household appliances, cars, etc.)

Overproduction and 1929

The market had become saturated with goods rarely anyone could afford as companies had more production plants than they needed; farmers had produced too much food, anticipating high demand because of the war, but since the war ended, demand fell but supply was too high.

5th Cause

The Toll on the Farming Industry

Cause of farmers' debt

Borrowed heavily from banks in 20s to pay for technologically advanced equipment, but once the war was over, they failed to sell surplus crops so were unable to pay back their bank loans or mortgages; many farmers lost their farms due to not paying mortgages and thus the bank seizing the farm

How much did farmers' income drop between 1929 and 1933

50 percent

Where was the Dust Bowl?

Mid-West and a bit South-West US

What caused the Dust Bowl?

A massive drought that turned the soil into powdery dust that swept across the plains in black clouds; bad farming techniques, especially not crop rotating to retain soil quality

How many families lost their farms between 1930 and 1934

Over one million families

6th cause

Unequal Distribution of Wealth

In the 20s, how was wealth distributed

In the hands of the few

In 1929, what percent of the population had 59 percent of the wealth?

1 percent of the population

Over what percent of U.S. families lived on or below the minimum subsistence level of $2,000 a year?

60 percent

How much did the average American see net income grow from 1920-1929 as opposed to rich Americans?

Average + 9 percent; rich + 75 percent