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Causes of the Great Depression

Causes of the Great Depression. #1 Stock Market Crash of 1929. Black Tuesday (Oct 29, 1929) symbolized the start of The Great Depression Within 2 months, investors had lost an estimated $40 billion It took 27 years for the market t o return to pre-crash numbers . #2 Bank Failures.

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Causes of the Great Depression

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  1. Causes of the Great Depression

  2. #1 Stock Market Crash of 1929 • Black Tuesday (Oct 29, 1929) symbolized the start of The Great Depression • Within 2 months, investors had lost an estimated $40 billion • It took 27 years for the market t o return to pre-crash numbers

  3. #2 Bank Failures • Following the crash, people began to withdraw their money from banks • Bank deposits were not insured and if a bank failed the people lost it all • In 1933 alone, people lost approximately $140 billion • The few surviving banks were not as willing to provide new loans

  4. #2 Bank Failures • Federal Deposit Insurance Corporation (FDIC) was created to protect people’s deposits • Farmers of the Dust Bowl defaulting on their loans was another reason for the bank failures.

  5. #3 Reduction of Purchasing Across the Board

  6. #3 Reduction of Purchasing Across the Board • Fear of further losses prompted people to stop purchasing items • This led to a decrease in production and an increase in unemployment • Unemployment led to even less spending

  7. #4 American Economic Policy with Europe • Government created the Smoot-Hawley Tariff (1930) to protect American companies by charging high tax on imports • This led to less trade with foreign countries • Not only did we stop buying from them, but they stopped buying from us

  8. #5 Farm Failures (Overproduction) • Many American farmers were already having a hard time before the Depression • They were producing too much and farm product prices were too low. • Soaring debt forced many farmers to plant an increasing amount of profitable cash crops such as wheat. • Farmers were desperate for income and could not afford to plant less profitable crops. • Unfortunately, the effect of all these farmers planting wheat was a surplus of wheat on the market, which drove prices down and, in a vicious cycle, forced farmers to plant even more wheat the next year. • The toll that the repeated wheat crops took on the soil contributed to the 1930s environmental disaster of the Dust Bowl in the West • Years of farming wheat without alternating crops (which was necessary to replenish soil nutrients) had turned many fields into a thick layer of barren dust.

  9. #5 Farm Failures (Overproduction ) • Things were so bad in some areas that farmers burned corn for fuel rather than sell it. • Then one of the worst droughts in recorded history hit the Great Plains. • The Midwest became known as the "Dust Bowl." • Dry winds picked up tons of topsoil and blew it across the prairies, creating huge, suffocating clouds of dirt that buried towns and turned farms into abandoned deserts.

  10. The Dust Bowl • The plight of these Dust Bowl migrants was made famous in John Steinbeck’s 1939 novel The Grapes of Wrath. • Tells the story of Tom Joad and his family who are forced from their farm in the Depression-era Oklahoma Dust Bowl. • They set out for California along with thousands of others in search of jobs, land, and hope for a brighter future.

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