Causes of the Great Depression
  Frameworks for America's Past
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Here are three of the main causes of the Great Depression:



1.  The Stock Market Crash
of 1929

   Shares of stock represent part ownership of a corporation.  They can be bought and sold by the public or by other businesses.

   Starting around 1925 the price of stocks began rising to high levels.  Investors kept buying, however, in hope that prices would go even higher. 

   In 1929, many of these investors started selling, and stock prices fell very rapidly.

 




Below:  Stock certificates of some old and famous American companies.
Paper stock certificates like these have become collectors items.











Below:  The New York Stock Exchange office on Wall Street in New York City.
Millions of "buy" and "sell" orders for stocks are processed there every day
from investors and businesses all over the country.






















Below:  A chart showing the sharp rise in the price of stocks during
the 1920s, and the Crash of 1929.  A very rapid rise in stock prices,
like that seen in the late 1920s, is often called a bubble.
A very sharp drop in stock prices is called a crash.












2.  The Federal Reserve failed to prevent
    the collapse of the banking system




The Federal Reserve System


   The Federal Reserve is the nation's central bank.  It was set up by the government in the early 1900s to help banks across the country operate properly.

   The Federal Reserve controls the nation's money supply.  It also inspects the financial records of banks to make sure they are being run correctly.

   In 1930 and 1931, however, the Federal Reserve did not act quickly enough to help the banks that were failing all over the country.


   The headquarters of the Federal Reserve is shown in the picture to the right.  The building is in Washington, D.C.









3.  High tariffs discouraged
international trade

    In 1930 Congress voted to raise tariffs on products imported into the United States.  A tariff is a tax on imported products, such as cloth, food products, or shoes.  Business leaders wanted the high tariffs as a way to protect their companies from the competition of lower cost foreign products.  Tariffs made the imported goods more expensive.

   The high tariffs were a disaster, however.  Overall world trade went down.  That hurt the American economy, which was already in serious trouble.

 




Below:  Men unloading imported fruit from a ship docked in New Orleans, Louisiana.














The stock certificate photos, charts, and globe are by David Burns. 
NYSE building photos courtesy Nova Development Corp.
Other photos are from the Library of Congress.
Some have been edited or resized for this page.



Copyright Notice

   Copyright 2009, 2014 by David Burns.  All rights reserved.  As a guide to the Virginia Standards of Learning, some pages necessarily include phrases or sentences from that document, which is available online from the Virginia Department of Education.  The author's copyright extends to the original text and graphics, unique design and layout, and related material.