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Causes of the Great Depression

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Tom Keefe

on 14 July 2016

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Transcript of Causes of the Great Depression

Unequal Distribution of Wealth
5 Causes of the Great Depression
Causes of the Great Depression

Problem with Prosperity
Prosperity relied on the sale of durable goods
There was no reason for wealthy to use their disposable incomes
People simply were not spending money!
High Tariffs and War Debts
Farm Crisis
Demand had decreased exponentially following the war
Improved machinery increased surpluses and farmer debt
Mortgages increased and 1/4 farms were sold
Farm land also decreased in value
Dealt with natural disasters (migration)
Unequal distribution of wealth
High tariffs and war debts
Farm Crisis
Prosperity relied on the sale of durable goods
Easy availability of credit
Easy Credit Availability
Nation's wealth grew by billions in the 1920's
Rich continued to get rich, while the poor continued to get poor (disposable income)
Bottom 99% only increased income by 9%, top 1% by 75%
An "installment plan" allowed for consumers to buy goods with credit in the 1920's
Ease of purchasing created profound misunderstanding and allowed for "free" spending during this era
Debt increased and as consumers continued to use credit, businesses and banks lost money
Unequal Distribution of Wealth
Farming Crisis
During WWI, farming industry in the United States had mechanized
Does it cost to mechanize?
What is the result of mechanization?
High Tariffs and War Debts
Although production costs decreased, wages and prices remained the same
Wealthy people used profits and invested into agencies of production (making more $$$)
Middle class and poor did not have enough money for "purchasing power"
Consumers could not purchase goods at the rate they were being produced
Raised tariffs restricted foreign goods in U.S. markets
Fordney-McCumber Tariff (1922)
Hawley-Smoot Tariff (1930)
No revenue from foreign exchange augmented the inability of paying war debts
U.S. was depending on those war debts and also suffered from the lack of foreign trade
European countries owed the U.S. over 10$ billion dollars after WWI
Despite Europe's inability to do so, the U.S. insisted the debts be paid
Dawes Plan (1924)
Foreign economies began to struggle even more as a direct result as they just received more loans
The symbolic start of the Great Depression
October 29, 1929
Question of the Day?
What should our feelings (emotions) be that our economy is so reliant on the consumerism?
Full transcript