Causes of the Depression

Causes of the Depression

1. Buying on margin (credit) - people were buying goods with money they didn't have. When banks needed people to pay back their loans they couldn't and banks were forced to close.

2. Worldwide economic problems - Europe was experiencing a serious depression starting in 1923. They weren't buying as many American goods.

3. People had overproduced (made too much) and were underconsuming (not buying as much as was made)

4. Uneven Distribution of Wealth - the top 5% of the population controlled 25% of the wealth. Over 60% of the population lived below the poverty line.

5. Effects of the Depression

   • High Unemployment
   • Poverty/Homelessness
   • Dust Bowl - Bad weather conditions (drought) plus overfarming on the Great Plains resulted in dust storms, dry lands, and farm failures.
     • Migrant Workers - workers, usually farmers, who left their homes looking for jobs in other places, especially California. They moved from place to place depending on where they could find jobs. Sometimes called "Okies" because so many came from Oklahoma.
   • The New Deal - FDR's plan to improve the economy, create jobs, and increase spending
     • This resulted in an increase in Presidential power. The role of the President became more important in US government.
   • FDR defeats Hoover - Franklin Roosevelt is elected in 1932 over Hoover who many believed didn't do enough to solve the depression.
   • Prices Drop - prices of consumer goods and farm goods dropped
   • Foreclosures - when people couldn't pay for farms, homes, or businesses they were taken back by the bank. Sometimes banks closed when they couldn't collect on their loans.

6. Stock Market Crash - 1929