WARM UP ① Create an episode map on the Roaring

twenties from the information in the notes and the video we watched yesterday

②  Include key people, events, inventions

Causes of the Great Depression

End of the Roaring 20’s I.  The 1920’s were full of prosperity and wealth for the

majority of the U.S.A.

II.  By the end of the 1920’s the U.S.A. began experiencing a recession

A.  Recession: an economic downturn; less profits; less money B.  Not enough people are buying consumer goods and businesses

are losing money

III.  At the end of the 1920’s the recession soon turned into a depression:

A.  Depression: economic stop; no work; no money B.  The USA entered into one of the darkest times in American history

known as the Great Depression

The Great Depression

I.  During the Great Depression the American economy collapsed losing Americans millions of dollars

II.  Companies were forced to close and Americans lost jobs & incomes à lost consumer goods and were left with nothing…

III.  The Great Depression was one of the worst time periods in American history…

Causes of the Great Depression

Overproduction

Political Decisions Stock Market Crashes

Bad Banking Practices & Fed Policies

Overproduction

Overproduction I.  The “roaring twenties” were an era of great prosperity and

economic growth A.  Republican economic theories = laissez-faire

II.  Mass advertising led to mass consumption of consumer

goods by the American people III.  Eventually business produced more than consumers could

purchase. A.  Businesses had to fire employees due to lack of production

IV.  In August of 1929 the America economy enters into a recession

A.  The economy began to slow down as consumers stopped buying products because they already have them

B.  Production falls à businesses lose money à worker lose income

How Overproduction Caused the Great Depression

I.  The U.S.A. over produced consumer goods II.  Supply was greater than demand and a surplus of goods

drove prices and profits down III.  Declining profits led workers to lose their jobs leaving families

without money to support themselves

IV.  Workers losing their jobs doesn’t allow them to pay for their goods purchased on credit

A.  Families lose everything = home, car, appliances

V.  Declining profits by companies meant stock values began to fall and the economy worsens until it enters into a depression

Bad Banking & Money Policies

I.  During the 1920’s industrial companies collected huge profits but their workers’ salaries rarely increased

II.  Low wages wouldn’t stop the working class from buying consumer goods

A.  Cars, radios, vacuums, washing machines

III.  Workers’ solution was to purchase goods on credit (buy now pay later)

IV.  By the end of the 1920s nearly all consumer goods were bought on installment credit

V.  Problem with credit: consumers don’t actually have the money to pay for consumer goods

Bad Banking & Money Policies

The Federal Reserve I.  Federal Reserve was created to

protect and manage America’s money supply

II.  Americans lack of consumption led the economy to enter a recession in 1929

III.  The Federal Reserve raised interests rates to counteract low production

IV.  Interest rates were too high and people cannot pay back their debt

V.  High interest rates led people to default on their debt à people lost the consumer goods

VI.  Companies lost money when loans weren’t paid back and fired employees

I.  The low industrial wages led workers to purchase consumer goods on credit

II.  Overproduction led to a decrease in production and soon companies were forced to fire employees

III.  These workers don’t have the money to pay for their loans

IV.  The American economy enters a recession & the Federal Reserve raised interest rates

A.  People can’t afford to pay back their debts B.  Companies fired employees, people have no money, can’t

purchase goods and the economy enters into a depression

How Bad Banking Caused the Great Depression So…

STOCK MARKET CRASHES

The Stock Market I.  The Stock Market is the indicator of the nation’s economy

A.  When stock values are high = the economy is doing well B.  People trust that companies are turning profits

II.  The value of stocks soared in the 1920’s as corporations

profits rose fueled by mass consumption and laissez-faire practices

III.  Americans began purchased stocks on margin (credit) A.  Paying 10% on stock and taking out a loan for the rest

IV.  While corporations were selling goods and turning a profit stock prices rose and buying on the margin was safe

A.  But corporations weren’t selling goods (recession) B.  When stocks lost money investors still had to pay the full value of a

stock even though it is worth less!

Stock Market I.  On Black Tuesday (October 29th 1929) the American

stock market crashed

II.  The market crashed as Americans panicked to sell off 16 million shares of stock

A.  When everyone sells stock prices go down and people lose money

B.  Stocks bought on margin don’t have the value investors paid for them

C.  Banks force investors to sell to pay off the loans D.  More selling drives price down even more… people lose even

more money

III.  Investors lose 26 billion dollars (312 billion in 2010 dollars) A.  Money evaporates into thin air

How the Stock Market Caused the Great Depression

I.  Banks made bad loans to investors to buy stocks on the margin…

II.  Recession led stock prices to fall… People sold stocks to avoid loses

A.  Prices fall even more with all the stocks for sale B.  People lose millions of dollars

III.  Stock market crashes due to massive stock sell off

A.  Billions of dollars vanish in hours… American people’s money is gone!!!

IV.  The stock market crash led the American economy to enter into a depression

Back to Bad Banking Policies I.  With the loss of money in stocks, people lost confidence with

their money being held in banks. II.  Customers raced to their banks to withdraw the money in

their savings accounts III.  Customers closed their bank accounts

A.  Banks don’t have any money left after bad investments B.  Banks close since they don’t have money and people lose their life

savings

IV.  The Federal Reserve doesn’t have the money to save the banks… Banks close and money vanishes

V.  The American people are now unemployed and have no money to feed themselves

How Bad Banking Caused the Great Depression

I.  The Federal Reserve failed to manage the bank closures and money crisis.

II.  Banks closed and people lost their life savings in

minutes

III.  Less money = less consumption = less production

IV.  Businesses go bankrupt = people lose their jobs

V.  The American economy stops and the country enters into a depression

Bad Political Decisions:

Bad Political Decisions I.  Conservative economic policy was a contributor to the

worsening Great Depression A.  Laissez faire: let the market right itself without government

intervention B.  Republicans do not spend more than collected in tax

revenue

II.  Hoover & laissez faire economics made the Great Depression much worse

III. The government did nothing to fix the economic problems that developed in the 1920’s and the economy continued to decline into depression

Bad Political Decisions I.  The lack of Republic solutions

to economic problems made them much worse

II.  Rising unemployment led homeowners to default on mortgages & lose their homes

III.  The homeless settled in shanty

towns called Hoovervilles A.  Named for President Hoover who

they believed caused them their problems

I.  Republican laissez-faire economic policies did not provide solutions to the problems facing the USA

II.  Hoover tried to use some government actions to

ease the crisis but it was too little too late III.  The Republican economic practices that made the

U.S. so wealthy in the 1920’s caused the U.S. to spiral into economic depression

IV.  Republican’s lack of solutions drove the USA deep into an economic depression

How Bad Political Decisions Caused the Great Depression

Are You With Me?? ①  Explain how overproduction caused the Great

Depression:

②  Explain how bad banking policies caused the Great Depression:

③  Explain how the stock market crash caused the Great Depression:

④  Explain how bad political decisions caused the Great Depression: