Please enable JavaScript.
Coggle requires JavaScript to display documents.
GREAT DEPRESSION CAUSES - Coggle Diagram
GREAT DEPRESSION CAUSES
stock market crash
-
-
Stock prices reached unprecedented levels, making investing seem like an easy way to make money.
Even ordinary people invested heavily, sometimes using disposable income or mortgaging homes.
-
-
-
-
Stock prices began to decline, triggering panic among overextended investors.
Millions rushed to sell their stocks, further driving prices down.
Between September and November 1929, stock prices fell by 33%.
-
-
Consumer spending, especially on durable goods, dropped sharply.
Businesses cut back on investments, leading to reduced industrial output and job losses.
-
Banking panics and monetary contraction
-
-
Fearful customers rushed to withdraw cash, fearing bank failures.
-
-
By 1933, one-fifth of all U.S. banks had failed.
President Franklin D. Roosevelt declared a "bank holiday" to allow banks to prove their solvency before reopening.
-
-
Many people hoarded cash, further reducing money in circulation.
-
The Federal Reserve raised interest rates and reduced the money supply to maintain the gold standard.
This lowered prices, discouraging borrowing, lending, and investment.
-
The gold standard
-
-
-
As U.S. output declined and deflation set in, the U.S. ran a trade surplus (buying fewer imports, exporting cheaper goods).
This led to foreign gold reserves flowing into the U.S., threatening currency devaluation in other countries.
-
To counteract the gold outflows, foreign central banks raised interest rates.
Higher interest rates reduced output, lowered prices, and increased unemployment abroad.
The resulting economic downturn, especially in Europe, was nearly as severe as in the U.S.
-
-
-