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Causes of the Great Depression from brainpop.com

The Great Depression was a great economic “slump” in the 1930s. Many Americans lost their jobs, saving, and their homes, and it affected the entire world.

Black Tuesday was when the New York Stock Exchange crashed in 1929.

Many historians believe that the Stock Market crash was one of many contributors to the economic slump and more of a sign.

In the 1920s or the Roaring 20s Americans were focused on making money and having fun. Factories were used to make products for consumers instead of for war. People were spending their money on new technologies. Movies and

Jazz swept the land.

Yet, a large part of the population many didn’t get to share in the prosperity. Farmers and other industries such as energy, coal mining, railroads, ship building and textiles suffered economically after WW1. Many manufacturers were making money, but much of the money wasn’t going to the workers, but the

management, instead.

Many Americans relied too much on credit and were not saving enough. They even borrowed money to buy stocks in the Stock Market. People built up so much debt that they couldn’t buy anymore. Factories shut down, unemployment rose, and there was a crash in stock prices.

Economies naturally have recessions, when more products are produced than they are demanded by

consumers. In the 1930s, the recession turned into a depression (a longer, severe recession.) Banks were making risky loans and people weren't able to pay back the loans. Banks failed. There was also less money and the Federal Reserve, America’s national bank, didn’t do anything about it. People rushed to get their money from the bank, but many banks began closing, so many people lost their life’s savings.

Many historians also blame President Herbert Hoover because he raised taxes. Consumers didn’t have money to spend and businesses weren’t able to grow.

Finally, in 1930, a ten-year drought hit the Great Plains, which affected farmers.

Many believe that massive government spending during WW2 pulled America out the the Great Depression in the early 1940s. Today, the government usually helps the economy in a

recession by giving Americans money back through tax buts, giving financial support, and lowering interest rates for loans. In addition, the Federal Deposit Insurance Corporation (FDIC) helps insure people’s money up to $250,000, so that the events of the Great Depression never happen again.