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Chapter 22 The Great Depression Begins

Chapter 22 The Great Depression Begins. Section 1 Causes of the Depression. Herbert Hoover Republican Secretary of Commerce Former head of Food Administration. The Election of 1928. Alfred E. Smith Democrat 4-time governor of New York 1 st Roman Catholic to be nominated for president.

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Chapter 22 The Great Depression Begins

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  1. Chapter 22The Great Depression Begins Section 1 Causes of the Depression

  2. Herbert Hoover Republican Secretary of Commerce Former head of Food Administration The Election of 1928

  3. Alfred E. Smith Democrat 4-time governor of New York 1st Roman Catholic to be nominated for president The Election of 1928

  4. The Election of 1928 (issues) • Religious differences b/w candidates played a major role in the campaign. • The Catholic issue led to a smear campaign against Smith • Republicans took full credit for prosperity of the 1920s.

  5. Hoover Wins Election of 1928

  6. The Long Bull Market • The stock market was established as a system for buying and selling shares of companies. • A long period of rising stock prices is known as a bull market. • Many Americans invested due to the prosperity of the 1920s.

  7. The Long Bull Market • Bull market ctd to go up, & investors bought stocks on margin, making a small cash down payment. • This is safe if prices ctd to rise. • If prices fall, broker cld issue a margin call demanding that the investor repay the loan immediately.

  8. The Long Bull Market • New investors bid prices up w/o looking at a company’s earnings and profits. • Speculation occurred when investors bet on the market climbing and sold whatever stock they had in an effort to make a quick profit.

  9. The Great Crash • By late 1929, prices dropped due to lack of investors and the bull market ends. • Resulted in many margin calls, which caused customers to place their stock up for sale, resulting in the market plummeting further.

  10. The Great Crash • October 29, 1929 – BLACK TUESDAY • Resulted in a $10 - $15 billion loss in value. • **This did not cause the Depression, but it did undermine the economies ability to hold out against its other weaknesses.**

  11. Banks in a Tailspin • The crash weakened the nation’s banks. • Banks lost money on their investments, and speculators defaulted on loans. • Gov’t didn’t insure bank deposits, customers lost their money if a bank closed.

  12. Banks in a Tailspin • Banks runs resulted as many bank customers withdrew their money at the same time, causing the bank to collapse.

  13. The Roots of the Great Depression • The uneven distribution of wealth in the U.S. added to the country’s economic problems. • 1929 – the top 5% earned 30% of the country’s income. More than 2/3 of the nation’s families earned less than $2500 a year.

  14. Roots of the Great Depression • Worker’s wages did not increase fast enough to keep up with quick production of goods. • Sales decreased, workers were laid off. • Many bought on installment plans, and paying these off left little money for other goods.

  15. Roots of the Great Depression • Hawley-Smoot Tariff – intensified the Depression by raising the tax on imports. • In return foreign countries raised their tariffs on American products.

  16. Mistakes of the Federal Reserve • Instead of raising interest rates to stop speculation, the Federal Reserve Board made the mistake of lowering the rates. • This encourage banks to make risky loans and misled business owners into thinking the economy was still expanding.

  17. End of Section 1 Next: Section 2 Life During the Depression

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