Economic Factors leading to the Great Depression
39c - examine economic factors that resulted in the Great Depression
Black Tuesday
Black Friday was on Tuesday, 10/29/29 and was the day that the Stock Market collapsed. Stock prices dropped as they were being sold. Many people bought stocks on margin. Margin was that you could get stock and paid 10% down and waited for the stock price to go up so it could be sold for some profit. This is also known as speculating. If the stock price decreased, you still had to pay the original price of the stock to the brokers. This happened a lot. Mounted police had to be called in to control the crowd on Wall Street. Causes of the G.D.
Americans had borrowed more money than they could repay. They had a default on loans. This hurt banks and businesses that were waiting to be repaid. Businesses had to lay off workers and banks collapsed due to loss of money. This was known as downsizing. Business had overproduced their products and when consumers stopped buying, they had to close or lay-off many more workers- downsizing. The US and other nations had high tariffs on goods coming into their nations. This prohibited consumers from other countries to buy American to help out American industry. The idea that government should play as little role as possible in economic affairs was Laissez-Faire. Due to this policy, the US government was late to react to counter the causes of the depression. |
The Destruction of King Cotton
However, the boll weevil made the South suffer. Cotton prices dropped, and a big drought hit the South in 1924. Farms, farm-related businesses, and many banks were shut down. |