THE GREAT DEPRESSION

BEGINS

ECONOMIC TROUBLES IN THE TWENTIES As the 20s progressed, the gap between the wealthy and the poor grew.

The following industries lost profit in the late 20s:

Steel

Textiles

railroads due to trucks, busses, and cars

Mining/lumber Declined due to war = less demand

Coal mining

New forms of energy (Hoover Dam, gas, oil…).

Housing starts – the number of new dwellings being built. When housing starts fall, so do jobs in many related industries

i.e.: roofers, lumber, plumbers, etc

MCNARY-HAUGEN BILL

International demand for wheat and corn output was high during the war.

After the war, many farms owed money to banks. Banks, in turn, foreclosed on farms as payment for the debt.

Many rural banks began to fail because they were not getting paid. Congress wrote the McNary-Haugen Bill, which helped farmers. Price supports: the government would buy crops in bulk at set prices. Key products such as wheat, corn, cotton, and tobacco were bought by the

federal government and sold on the world market. Fun Fact!!!!** Coolidge vetoed the bill twice. “Farmers don’t make money.”

What industrial weakness signaled a declining economy in the 1920s?

CONSUMER CRISIS Credit: an arrangement in which consumers agreed to buy now and pay later

for purchases in the form of installment plans (monthly payments) that included interest charges. Easily available. People had trouble paying it off.

During the 20s, the gap between the rich and poor grew. More than 70% of the nation’s families earned less than 2500 dollars per year.

(considered the minimum standard of living).

Many families could not afford household products that manufacturers produce. The average person bought a new outfit once a year. Half the homes in cities had lights. One in 10 homes had a refrigerator.

The wealth of the era rested on the foundation of credit.

What did the experience of farmers and consumers at this time suggest about the health of the economy?

ELECTION OF 1928 Republican Herbert Hoover v. Democrat Alfred E. Smith

Hoover was secretary of commerce under presidents Harding and Coolidge. Had no experience in office at the time.

Smith was a 4 term governor of New York and a better candidate.

Why did Hoover win? Americans were happy with republican leadership. Since 1920 America had prospered under republican leadership.

WHAT IS THE STOCK MARKET? Stock: a share of ownership of a company.

Dow Jones Industrial Average: a measure based on the stock crisis of 30 large firms trading on the New York Stock Exchange (NYSE).

Bull Market: a period of rising stock prices.

By 1929, four million Americans (3% of the population) owned stocks.

Speculation: when people buy stocks and bonds on the chance of a quick profit, while ignoring the risks.

Buying on margin: paying a small percent of a stock’s price as a down payment and borrowing the rest. Buying stocks on credit?!?!?! If the value of stocks declined, the people who bought on margin wouldn’t be able

to pay off the loans.

How did speculation and margin buying cause stock prices to rise?

James N. Rosenberg: dies irae = “Day of Wrath”

Few were prepared for the stock market crash. This cartoon by Rosenberg shows Wall Street crumbling on Oct. 29, 1929.

1. What does the cartoonist suggest will happen to individuals because of the crash?

2. How does the cartoonist convey the sense of fear and shock?

3. What do the looks on people’s faces indicate about the impact of the crash?

STOCK MARKET COLLAPSE September 1929 stocks reach peak price then fall

October 24, 1929 stock market begins to collapse

October 29, 1929 is Black Tuesday It is the day when the stock Market began to crash as stock prices fall and

shareholders sell all of their stock causing the prices to fall faster. People who were unable to sell their stock lost it. People who bought it with their savings lost them. People who bought stock on credit gained debt.

FINANCIAL COLLAPSE People begin pulling their money out of their banks causing the banks to

collapse.

About 90,000 businesses went bankrupt. Many were the successful automobile and railroad companies.

Unemployment rises from 3 percent to 25 percent. 12.4 million people lost their jobs

GLOBAL REPERCUSSIONS Europe was rebuilding and paying off debts incurred during World War 1

America’s economic collapse made it difficult for Europe to import from or export to America

America responded to this problem by creating the Hawley-Smoot Tariff Act The highest protective tariff in history to allow for America to compete globally. It

backfired preventing most industries in Europe and in America from easily trading.

CAUSE OF THE GREAT DEPRESSION1. Tariffs and war debt policies made it harder to trade.

2. Problems in agriculture1. Dust Bowl2. Overproduction

1. The prices were to low.

2. The supply was to big.

3. Credit

4. Unequal Distribution of Wealth

THE GREAT DEPRESSION A period between 1929 and 1940 where the economy collapsed and

unemployment skyrocketed

THE DEPRESSION IN THE CITIES Rise of Shantytowns

These were shacks created by the residents of cities to live in after they lost their jobs and were evicted from the houses or apartments.

Soup kitchens and bread lines These were place that people went

to get food to feed themselves and their family.

THE DEPRESSION IN THE RURAL AREAS Farmers began losing their farms

during the Great Depression 1929-1932

400,000 farms went through foreclosure

The Dust Bowl: KA, TX, OK, NM, CO – mass exodus to California

Drought began in early 1930’s.

An ecological disaster caused by the over usage of land.

The soil was carried by the wind making the land barren

THE AMERICAN FAMILY Families stuck together

Played monopoly and listened to radios

Homelessness skyrocketed 300,000 “hoboes” Thomas Wolfe

“you can’t go home again” about hoboes

Direct Relief: cash payments or food provided by the government for the poor did not exist yet Weekly payments: $2.39 a week per family

Many believed married women had no business in the work place Some cities refused to hire female teachers

It was assumed women were having and easier time because their were less female homeless

By 1933 2,600 schools closed Students went to work instead Transient teenagers became known as Hoover Tourists jumping RR'