By John Washington. List of causes AAlthough the stock market crash was the ultimate cause, many other long and short term causes greatly affected and.

CAUSES OF THE GREAT DEPRESSION

ByJohn Washington

List of causes

Although the stock market crash was the ultimate cause, many other long and short term causes greatly affected and worsened the Great Depression

Extreme Unequal distribution of wealth High tariffs and war debts Overproduction in industry and

agriculture Farm crisis Buying on credit

Unequal Distribution of Wealth 1% of the richest owned 40% of the

wealth of the U.S. Part of this was due to Warren G.

Harding reducing taxes and regulations which allowed monopolies to form

As you can see, from about 1924 to the early 1930’s, the top 1% started controlling more and more

High tariffs

After World War 1, European countries owed the United States billions of dollars

In 1922, the U.S. passed the Fordney-Mc Cumber Act which instituted high tariffs

European nations retaliated with high tariffs and world trade declined

Overproduction

After World War 1 factories and farms were producing more than was needed

Americans were buying items on credit which got them into debt. The bank took the item if one payment was missed

Debt meant less spending Workers made too little to buy their

own output

Continued

It was hard to sell overpriced food and items overseas due to high tariffs

Prices dropped dramatically due to overproduction

Farmers and businesses could not repay their debts which resulted in some bank failures and even more unequal distribution of wealth

Farm Crisis

Due to price drops, farmers made so little money

In the early 1930’s, the depression worsened greatly because of the dust bowl, which was caused by severe droughts and producing the same crop over and over

This resulted in a huge decrease of food from the Midwest, previously called the bread basket because of its huge food production

Stock Market

Calvin Coolidge’s years marked 5 years of artificial rise in the stock market

The value was overpriced due to speculation

Fraud and illegal activity ran rampant due to lack of regulation and rules

The Stock Market was unregulated so some investors were able to manipulate huge amounts of money to their advantage

Continued

On September 3rd, 1929, prices reached an all time high

Market wobbled for several weeks On Thursday, October 24, known as

Black Thursday, many major investors tried to sell their stock, but were unable to find enough buyers due to the high prices

Prices dropped which encouraged more attempted selling

Continued

Nearly 13 million shares changed hands, more than 3 times as many as a typical heavy day, and stock values fell more than 8 billion dollars

The next day, buying and selling was still high and President Hoover and newspapers made statements about the stability of the market

The Crash

However, Monday, October 28, was another horrible day

Nine million shares changed hands It now became obvious that the stock

market had crashed Over the next few weeks, stock

investors lost over 30 billion dollars Reports of suicides over lost fortunes

were rampant

Effect of the Crash

Banks would loan money to buy stocks with Banks with only a 10% down payment

After the crash, many investors and non investors tried to draw out their savings at the same time

Savings accounts were uninsured and did not have the money in cash for the people withdrawing their savings

Continued

Thousands of U.S. banks declared bankruptcy and more than 9 million savings accounts were wiped out, dragging the United States into the Great Depression

The crash wiped out many middle class Americans

Unequal distribution of wealth and the middle class getting a severe setback led to poverty for an extremely high percentage of Americans