11 Recognized Causes of the Great Depression

Maldistribution of income and purchasing power
12 million families in the U.S. had incomes of less than $1500. Basic necessities cost $2000. Families could not afford to buy what they are producing in industry–products go unsold.

Overexpansion of agricultural production
Supply was up and demand was down. Together this equaled low prices. It cost farmers more to produce their products than they were getting at the market.

Overproduction of industry–especially of durable goods
A durable good is one used over and over. Examples of durable goods: washing machines, refrigerators, cars, furniture. Inventories grew. Prices were reduced which lowered profit. Wages were cut to make up for lost profit. Production was cut which led to unemployment.

Automation
Machines were doing the jobs of people which led to unemployment

Unregulated banking practices
Banks were giving unsecured loans, margin loans, and not requiring proof of income for loans.

U.S. Tariff Policy
The U.S. had high tariffs; Europe responded likewise– eventually, the U.S. had hurt itself economically. The U.S. could no longer compete.

Impact of European and word economy
The depression was worldwide. Under the Treaty of Versailles, Germany was required to make reparations and was eventually undable to do so. The U.S. made loans to Germany under the Dawes Plan. Germany paid France and Great Britain who could then pay the U.S. Eventually, even the loans weren’t enough.

Monopolistic Pricing
Companies were overcharging and people could not afford the products. Eventually, the products no longer needed to be made.

Philosophy and policies of the Hoover Administration
Hoover followed the trickle down theory (now known as Reaganomics). Under this theory, the government legislated to put money in the hands of the wealthy who would invest and create jobs. Eventually, the prosperity will trickle down through all layers of the economy.

Overexpansion of credit–overuse of installment loans
People borrowed money for everything–houses, cars, furniture. They could make only so many payments before their money ran out. If unemployed they could make no payments.

Stock Market speculation and crash
People over-invested on margin loans; they panicked and began to sell; prices fell; this led to more panic; and eventually led to the crash. The crash is known as Black Tuesday and occured on October 29, 1929.

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What is Bull Market? When values of stocks continued to increase during the 1920’s Banks loaned money to stockbrokers to facilitate what? on margin buying WE WILL WRITE A CUSTOM ESSAY SAMPLE ON ANY TOPIC SPECIFICALLY FOR YOU FOR ONLY …

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d. to make big gains from rising stock prices The Stock Market boom of the 1920s was characterized by a big increase in the number of people who bought stock chiefly. a. to make safe investments b. to earn dividends …

Use of Credit (Definition) Buying with money you don’t have and paying it back later. Use of Credit (Effects) 1) Personal debt/can’t pay back loans 2) Business failure/unemployment 3) Bank failure WE WILL WRITE A CUSTOM ESSAY SAMPLE ON ANY …

Causes of the Great Depression ♦Uneven distribution of wealth ♦Stock market speculation “buying on the margin” ♦Excessive use of credit ♦Overproduction on consumer goods ♦Weak farm economy ♦Government policies ♦Global economic policies Black Tuesday ♦Stock market crash (Oct. 29, 1929) …

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