Please do not talk at this time April 19

HW: Chapter 15.2 Cornell Notes (Pg. 127A/B)Lost Generation/Great Depression Quiz on Monday

The Great Depression hit the world very quickly. Events spiraled out of control across the globe in only a few months. We’re going to look at some of the causes of the Great Depression.

As we go through the 6 Causes of the Great Depression, create a Flow Chart to show the Cause and Effect relationship of these events. Use the small cards you cut out to help you organize.

Get an orange sheet and cut out the pieces

You will also need glue and a piece of paper!

Once they are all cut out, look at what each one says so you can find it later.

The horror of WWI caused many people to feel they should live life as richly as possible while they could.

Even so, 60% of Americans lived under the poverty level ($2000/year)

People made up the difference by borrowing money. They bought stocks on the stock market, and when they went up, sold them and used the profits to buy more stock.

Businesses saw all this imaginary money in the market and began to produce large amounts of goods, hoping people would buy them with credit from their stocks.

Eventually people realized that there wasn’t any actual physical wealth (gold, oil, diamonds, land, etc) behind the stock prices. They began to sell their stocks while prices were good.

This caused a panic in 1929. Banks who had given loans to people to buy stocks demanded their money back. People sold more stocks to pay off as much of their loans as they could. For the next 4 days, the Dow lost over 10% of its value every day.

Total losses for the four days: $30 billion, 10 times federal budget and more than the U.S. had spent in World War I ($32B estimated). The crash wiped out 40 percent of the paper value of common stock.

Thousands of people were left holding worthless stocks and millions in loans to banks.

After the stock market crash, bank were left with massive loans on their books that people would never be able to repay.

Without any money left to do everyday business, banks stopped lending, laid off employees and in many cases went bankrupt. There was no FDIC Insurance at this time, so when a bank closed, people lost all the money they had in the bank.

In 1929, there were 25,568 banks in the United States; by 1933, there were only 14,771. Personal and corporate savings dropped from $15.3 billion in 1929 to $2.3 billion in 1933.

At the end of WWI, Europe was in a terrible state. The Allies and the Central powers were bankrupt. Germany was burdened with massive war reparations. Britain and France needed to rebuild their infrastructure (agriculture, factories, transportation lines, etc) and populations.

The US was happy to lend money to these countries, first to finish WWI, and then to rebuild. They did this through loans.

However, once US banks began failing ... the banks not only stopped making loans, they wanted their money back. This put pressure on European economies, which had not fully recovered from WWI, contributing to the global economic downturn.

With the stock market crash and the fears of further economic woes, individuals from all classes stopped purchasing items.

But companies had a huge stockpile of items to sell already made, but not paid for. So companies stopped producing goods until they could sell what they had.

With the fall in production, companies didn’t need as many workers and had to lay people off.

As people lost their jobs, they were unable to keep up with paying for items they had bought through installment plans and their items were repossessed. More and more inventory began to accumulate.

The unemployment rate rose above 25% which meant, of course, even less spending to help relieve the economic situation.

As businesses began failing, the government created the Smoot-Hawley Tariff in 1930 to help protect American companies from international competition. This charged a high tax for imports, making American goods cheaper to buy.

When Americans stopped purchasing goods from other countries, those companies began to collapse as well, putting more people out of work, so even fewer people could buy anything from anybody.

Other countries retaliated by passing their own Tariff bills, which had the effect of reducing world trade 66% and causing the Great Depression to spread to the whole world

Is your effect REALLY caused by your cause or something else?

Use Chapter 15, Sec. 2 to check your work.

Only when you are confident in your answer should you draw in your arrows and glue down your cards onto Pg. 128A… Title this page: Great Depression Cause and Effect

Chpt 15.2 Cornell Notes- Pg. 127AGreat Depression Cause and Effect-

Pg 128A