Causes of the Great Depression
(1929-1939)
1. Overproduction:
 Factories and farms produced more goods than people can buy (overproduction).
 After WW1 many countries no longer can afford American goods
 RESULT of Overproduction:
a. Prices of goods drop (goods were cheaper)
b. Workers began to get laid-off (fired)
c. Companies Shut Down
d. Farmers have to sell their farms
2. Stock Market Crash of 1929:
What do I need to know about the Stock Market??
 The Stock Market is a place where stocks and bonds are “traded” – meaning bought and
sold.
 Stock – units of ownership in a company.
Stock Market in the 1920s
 Americans bought stocks in hope of getting rich
 The economy is improving and people assume it will continue to do well.
 Some Americans bought Stock on Margin: they borrowed money from the bank and use
that money to buy stock. (over speculation)
 Summer of 1929, the value of stocks started to fall, so people got nervous and began to
sell their stocks.
 Stock Market Crashed: “Black Tuesday”: Oct. 29, 1929
a. Value of stock plummets
b. People lose all of their savings
c. People who over speculated couldn’t pay back the bank.
3. Banks Fail:
 Banks had loaned money to people who invested in the stock market.
 When the stock market crashed, people could not pay their loans and the banks could not
give depositors their money.
 As a result, many banks closed down and many families lost their life savings.
 40% of banks closed in the 1930s