Causes of the Depression

1. Causes of the Depression USA 1919–1945

2. What can we learn from History? Work through the following slides about some of the causes and effects of the US depression of the late 1920s/1930s. Do any of the causes and effects have similar themes to the recent global financial crisis? Investigate the boom/bust cycle anddiscuss whether learning about the past can help prepare us for the future.

3. Long term cause: easy credit Some historians have argued that the high consumer confidence that powered the boom was a key factor in triggering the depression. Advertising and easy credit through hire purchase, binders and buying on the margin, encouraged people to borrow more money than they could afford to pay back if things went wrong. What might happen when people start to lose their confidence in the economy?

4. The Florida land boom

5. Short term cause: over-confidence By 1929, share prices had hit an all-time high. Experts began to worry about the profits of companies who could not sell their goods. However, investors kept on pouring money into buying shares in the hope of making money, whilst secretly, some experts started selling their shares. Rumours began to circulate that share prices were about to fall. But it was over-confidence that kept share prices increasing.

6. Wall Street crash Panic selling on 24th October 1929. Big investors secretly start selling shares. Rumours start that share prices will fall. Nobody is buying shares so the prices crash. Bankers try to restore confidence by buying shares. Investors start selling shares to repay borrowed money. Stockbrokers ask investors to pay back borrowed money. Rumours start that share prices will fall again.