Causes of the Great Depression

  • End of WWI, Treaty of Versaille

    End of WWI, Treaty of Versaille
    During World War I, federal spending grows three times larger than tax collections. When the government cuts back spending to balance the budget in 1920, a severe recession results. However, the war economy invested heavily in the manufacturing sector, and the next decade will see an explosion of productivity… although only for certain sectors of the economy.
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    Roaring 20's False Sense of Prosperity

    False Sense Of Prosperity Before The Great Depression
The 1920s, known as “The Roaring Twenties” marked a time when America was overdependent on production, automobiles were the leading industry, and there was a great disparity between rich and poor.
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    Speculation and Overleverage

    With only loose stock market regulations in place before the Great Depression, investors were able speculate wildly, buying stocks on margin, needing only 10% of the price of a stock to be able to complete the purchase.
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    Decline in Farm Prices, Farmers Default on Loans, Rural population stops buying, Banks fail

    The Great DepressionPost WWI, European agriculture revived and grain from Argentina and Australia enter world market.
    Farmers are in lots of debt, have high taxes and less income.
  • Hyperinflation begins in Germany

    Hyperinflation begins in Germany
  • The Ford-McCumber Tariff Act

    Raised American tariffs to protect farmers. he economic effect was that the tariff raised the purchasing power of the farmers by two to three percent, but there was a disparity between the burdens that the other industries imposed on farmers. In September 1926, economic statistics were released by farming groups that revealed the rising cost of farm machinery. For example, the average cost of an harness rose from $46 in 1918 to $75 in 1926, the 14-inch plow doubled in cost from $14 to $28.
  • Calvin Coolidge, "Silent Cal", elected President

    Calvin Coolidge, "Silent Cal", elected President
    Coolidge restored public confidence in the White House after the scandals of his predecessor's administration, and left office with considerable popularity.[2] As a Coolidge biographer put it, "He embodied the spirit and hopes of the middle class, could interpret their longings and express their opinions. That he did represent the genius of the average is the most convincing proof of his strength."[3] Some later criticized Coolidge as part of a general criticism of laissez-faire government
  • Revenue Act of 1926

    Revenue Act of 1926 passed, cutting taxes of those earning $1M or more by two-thirds
  • Lindbergh flies across Atlantic Ocean

    Lindbergh flies across Atlantic Ocean
    May 20, Charles Lindbergh takes off from Roosevelt Field in Long Island, N.Y., aboard the Spirit of St. Louis on his historic solo flight to France
  • Sacco and Vanzetti Executed

    Sacco and Vanzetti Executed
    The arrest of Sacco and Vanzetti had coincided with the period of the most intense political repression in American history, the "Red Scare" 1919-20. The police trap they had fallen into had been set for a comrade of theirs, suspected primarily because he was a foreign-born radical. While neither Sacco nor Vanzetti had any previous criminal record, they were long recognized by the authorities and their communities as anarchist militants who had been extensively involved in labor strikes, politic
  • Herbert Hoover elected

    Herbert Hoover elected
  • Federal Reserve announces a ban on bank loans for margin trades

    recognizing Broker's loans had gone too high issued a statement to individual Reserve banks regarding their position on speculative loans and insisted that Federal Reserve credit not be used for speculative purposes.
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    Bank Failure and Lack of Credit

    Once the stock market crashed, fearful that banks would fail, millions of Americans began to withdraw their money. Virtually overnight, they put thousands of banks in peril.
    With massive draws on funds during the Great Depression, banks had no money to lend, and this lack of available credit led to a further worsening of economic conditions.
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    High Unemployment Rates During The Great Depression

    When consumer spending plummeted during the Great Depression, unemployment rose, reaching its highest level in 1933, when 25% of the workforce was idle.
  • Black Tuesday, Stockmarket Crashes

    Black Tuesday, Stockmarket Crashes
  • New York Times prints petition of 1,028 economists who oppose Smoot Hawley Tarrif Ac

  • Smoot-HawleyTariff Act

    Smoot-HawleyTariff Act
    Congress passes the Smoot-Hawley Tariff, steeply raising import duties in an attempt to protect American manufactures from foreign competition. The tariff increase has little impact on the American economy, but plunges Europe farther into crisiis.
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    Dust Bowl

    Severe drought and Dust Bowl conditions began to ruin farmers’ land, a condition that lasted until 1935
  • Federal Reserve Contracts Money Supply

    In addition to allowing the Bank panics to reduce the U.S. money supply, the Federal Reserve also deliberately contracted the money supply andraised interest rates in September 1931.
    Such declines in the money supply caused by Federal Reservedecisions had a severe contractionary effect on output.
  • Al Capone Convicted

    mobster Al Capone was convicted of income tax evasion and sentenced to 11 years in priso
  • FDR elected President

    Democrat Franklin D. Roosevelt defeats incumbent Republican President Herbert Hoover in a landslide to win the presidency