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There are 4 major trends that lead to the Great Depression

  1. Agricultural Problems-- Farmers were unable to pay back bank loans they used to buy tractors and other equipment and many farms were foreclosed, leading to banks being forced to close. Prices on food were going down, so farmers were forced to grow more food to make ends meet, which in turn made prices even lower. Bills to help farmers were vetoed by Coolidge on two occasions.
  2. Installment Buying-- For the first time, large numbers of Americans bought things like cars, refrigerators and vacuums on credit and promised to pay 36 or 48 monthly payments. Because Americans were paying for past purchases, they were not able to buy other items available for sale. New goods were being produced, but people could not buy them, which led ot layoffs as early as 1928. As the depression began to worsen, this increased.
  3. Uneven Distribution of Wealth-- The Mellon Tax Structure had a very minimal tax on the richest sector, theorizing that the benefits would trickle down throughout society. However, this did not occur. By the time of the stock marketcrash, the top 0.2% of America controlled 40% of the nation's savings. 3/4 of America made less than $3,000 a year.
  4. Stock Market Speculation-- Like buying goods in installments, people would buy risky stocks with great possible payouts on credit, by putting down only 20% of what it was worth. As long as prices continued to rise, they could pay back to the other 80%, but as soon as they crash brokers wanted their money back, but it was impossible.

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In the 1920's, Americans began buying goods they couldn't pay for. Consumers wanted the newest products, but didn't have enough money to buy them. They began to use a system called the credit card to buy luxury goods. Banks also made risky loans and did not spend money wisely. On Oct. 29, 1929, the stock market crashed. This event, known as Black Tuesday, was the #1 cause of the great depression. After the stock market crashed, Americans swarmed into banks, demanding their money back. However, the banks had made risky loans, and like the Americans, had little or no money to give back. Banks began closing all over the U.S. Americans also were afraid to buy anything anymore, so businesses started going out of business.

Also, during the depression, the area in the middle of the U.S., known as the Dust Bowl, was attacked by a huge drought that swept up topsoil. This soil made it possible to grow crops, and when it was blown up by huge dust storms, there was no way to farm. Many families who lived in the states of Oklahoma, Arkansas and Kansas were left with no work and no food. Many moved to California.

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11y ago

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