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Standard and Objective

This lesson explores the economic causes of the Great Depression and the consequences that followed, including the stock market crash and the closure of banks.

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Standard and Objective

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  1. Standard and Objective SSHS-S1C8-01-a Strand 1: American History Concept 8: Great Depression and World War I P.O. 1: Describe causes and consequences of the Great Depression • economic causes of the Depression Students will comprehend the economic causes of the Great Depression by identifying three major financial events of the 1920s.

  2. The Causes of the Great Depression 1929

  3. Alfred E. Smith • Democratic nominee • Governor of New York • Roman Catholic?!

  4. Herbert Hoover • Republican nominee • Secretary of commerce • Former head of the Food Administration • Quaker

  5. The Election 1928 • Herbert Hoover v Alfred E. Smith • Protestants thought the Catholic Church was financing Smith’s campaign and would have much influence if he won • Hoover won by a landslide • 444-87

  6. Religions of Presidents

  7. Stock Market Soars • “I have no fears for the future of our country, it is bright with hope.” -Herbert Hoover’s Inaugural Address • 10% of American households owned stocks • Buyers engages in speculation • Investors bought on a margin

  8. The Great Crash • October 24th 1929, Black Thursday • Black Tuesday -More than 16 million shares were sold and the of the industrial index went down 10% • By mid-November $30 billion was lost -roughly equal to total wages Americans had earned in 1929

  9. Banks close • Banks lent billions to stock speculators • Many banks invested depositors money in the stock market • When the market crashed banks lost investments and speculators defaulted on their loans • Banks severely cut back on their loans

  10. What is a run on the bank? • Some banks closed and there was no insurance on bank deposits so customers lost all of their money • If it seemed like the bank might fail, depositors would make runs on the bank taking out all of the money they had • Banks don’t hold all of their depositors money at the actual bank so this would cause the bank to fail

  11. Roots of the Great Depression • The amount of credit Americans took out in the 20s • Buying items on installment plans • Overproduction • 5% of Americans earned 30% of the nation’s income • ⅔ of Americans barely made enough money to live • Companies had to lay off workers and families had no back-up plan

  12. Loss of Export Sales • Hoover tried to lower tariffs so businesses and farmers could sell their wares overseas • Congress instead enacted the highest tariff ever called the Hawley-Smoot Tariff • Other countries didn’t want to trade with America in response leading to even lower sales

  13. Mistakes by the Federal Reserve • Didn’t raise interest rates to curb risky speculation • By doing this, the board encouraged member banks to make risky loans • It also led business leaders to think that the economy was still expanding • Led to overproduction when sales were falling • When the depression hit, the Federal Reserve raised interest rates, tightening credit and continuing the downward spiral

  14. A Little Context • The Weimar Republic • Hyperinflation • What do you think the picture to the right shows?

  15. Exponential Growth • $1 was equal to $1,000,000,000,000 • Money was used as wallpaper • Menu price could be 5,000 Marks for a cup of coffee. You could have two cups and when the bill came, it would be for 14,000 Marks.

  16. Let’s Review What economic choices caused the economy to become unstable in the late 1920s? How did the stock market crash trigger a chain of events that led to the Depression?

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