The Causes of the Great Depression

1. The Causes of the Great Depression An Introduction to the 1930’s

2. 1920’s Economics The economy of the 1920’s seemed extremely strong Average people were able to make a lot of money because of good jobs and a booming stock market However, the 20’s economy was flawed Irresponsible spending and production soon led to serious problems

3. Cause #1: Overproduction As people started buying all the new consumer products that became available, companies opened new factories, hired more workers and expanded production Companies continued to expand rapidly in the 20’s, but the demand for products did not grow at the same pace Soon, many companies were making more products than they could sell This eventually led to severe price drops and layoffs

4. Cause #2: Buying on Credit Credit (Loans) became available to the average person for the first time in the 20s People took advantage of this by buying things and playing the stock market with borrowed money Many people (and industries) spend more money than they could ever make By the late 20’s, many people began to default of loans

5. Cause #3: The Stock Market Crash What is the Stock Market? Businesses need money to grow One of the best ways for a business to get money is to “go public” This means that the company will sell pieces of itself (shares)to anyone People buy “shares” because they become part owners of the company and get part of the extra money (dividends) at the end of each year People also buy “shares” because if the company is doing well, they can sell their “shares” to other people for more than they bought them for The “Stock Market” is the place where businesses and people buy and sell these “shares.”

6. Cause #3: The Stock Market Crash con’t The stock market was very strong in the 1920’s as just about everyone was making money buying and selling “shares.” However, smart investors realized their was a problem With most people investing with borrowed money and massive overproduction, the stock market was headed for disaster Major investors began to pull out their money in the late 20’s This caused “share” prices to drop

7. Cause #3: The Stock Market Crash con’t With “share” prices falling for the first time in a decade, people panicked and everyone desperately tried to get rid of their “shares.” On October 29, 1929, the New York Stock exchange collapsed as stock prices fell to almost nothing“BLACK TUESDAY” Other stock markets around the world soon followed Billions of dollars of investments became worthless People lost everything!

10. Cause #4: Banks and Governments over-react In response to the crisis, the US government called back all their loans and stopped trading with other countries This severely hurt Canada because we sold many things to Americans Banks called back their loans as well When people couldn’t pay, the banks seized property People lost their homes, cars and sometimes the clothes off their backs

13. Cause #5: Drought On top of the problems that happened in the cities, the Prairies experienced the worst drought in history Basically, it didn’t rain for almost a decade! Plants and trees dies and farms turned to dust The Prairies soon resembled a desert with extreme heat and massive dust storms

14. Key Points The Great Depression was caused by: Overproduction Credit Buying The Stock Market Crash Governments and banks calling back loans Drought in the prairies