The Crash, Great Depression & New Deal No event of the twentieth century had a more profound impact on American life Hard Times Herbert Hoover Republican Iowa Objective Identify & explain the causes of the 1929 stock market crash. Watching the ticker tape at the height of the bull market. Stock Market Simulation Trouble Signs Speculation buying stocks and bonds on the chance of a quick profit, while ignoring the risks. Stocks - Owning stocks in a company makes you part owner of that business. If the company is successful the value of the stocks will rise or it will be able to pay a higher annual dividend. The better the company does, the better the investor does.Stocks Bonds - Governments, states, corporations and many other types of institutions sell bonds. It is a promise to repay the principal or cost price along with the interest on a specified or maturity date.Bonds Trouble Signs Buying on Margin paying a small percentage of the stocks price as a down payment and borrowing the rest. The government did little to regulate the market The reality was that these upward spiraling prices did not reflect the true value of the companies If stock prices decreased, people buying on margin had no way of paying off their loans The Bull Market Stock prices increase 2x the rate of production Interpret the following quote In effect, the automobile of American capitalism had one foot pressed to the accelerator of production and another on the brake of consumption. The Bull Market The average Americans attitude about the future of the stock market. The Bear Market A prolonged period in which investment prices fall, accompanied by widespread pessimism.periodinvestment The Bull Market Stock prices rise in the 20s The market is viewed as a get rich quick opportunity The basic concept of the stock market The Bull Market Two ways to make money in the market: Long term investment (Dividends & reinvestment) Speculation 4) Margin buyers Risky? The Bull Market 2) Weakness developing within the market?... Paper value outran real value # of Americans owning stock? 4 million out of 120 million = 3% The social elite watching the ticker tape at the height of the bull market. The Crash * Not a 1 or 2 day event Oct. 29 Black Tuesday Wall Street Black Tuesday 1929 The Crash The Causes of the 1929 Market Crash Confidence in investment growth waned, end of the BULL PANIC with no buyers Speculation & margin debt based on easy credit collapses Lack of government regulation? Dow Jones Dow Jones The Crash $30 billion wiped out Hoover, the fundamental business of America is sound Andrew Mellon, it will purge the rottenness out of the systempeople will work harder & be more moral. Objective Summarize the reasons why the Great Depression occurred. Underlying Weaknesses Productivity increased but wages do not and reduces consumption Overproduction (farming) Uneven distribution of wealth How Banks Create Money How banks make money Why does it work? Banking is all about trust. While people are putting money into the bank every day, the bank is lending that same money and more to other people every day. If everyone goes to the bank at the same time and demands their money (a run on the bank), there might be problem. Consumers Have Less Money to Spend Rising Prices Stagnant wages Uneven distribution of wealth Overbuying on credit Uneven Distribution of Income 65% 29% 5% 1% GNP Gross National Product 1929: GNP = $104 billion 1933: GNP = $56 billion The total amount of goods & services produced within our economy Global Effects of the Depression American investors withdraw $ from Europe World trade plummets and unemployment skyrockets Germany and Austria extremely hard-hit In Asia, farmers and workers suffer as exports drop by Demand for Latin American products like sugar, beef, and copper collapse Global Repercussions, US Treasury Wall St. US Banks Loans Reparations Debt Payment Global Effects of the Depression How might a depression of this world scale contribute to the rise of dictators like Hitler and Mussolini? SHOW U the causes of the Great Depression S tock market crash & financial panic H igh Tariffs limiting trade O ver production in industry W eak agricultural economy U nequal distribution of wealth Describe the human cost of the Great Depression. Objective Mass Unemployment 19291945 Mass Unemployment 1930 = 4.2 million or 9% 1933 = 12.6 million or 25% What did it mean to be unemployed and without hope in the early 30s? Self-loathing Despair Urban centers 50% African Americans 50% Deportation of Mexican immigrants Human Cost Social Impact Soup kitchens - Breadlines Homeless people Many traveled on railroads as Hobos Unemployment: Men line up outside an employment agency hoping to find work. The Homeless What irony is expressed in his picture? Human Cost Impact on Health Hunger Malnutrition Children suffer long term health issues 3x normal # admitted to mental hospitals The later impact on health 50% of the men drafted for World War II in were rejected for medical or dental reasons Poverty brings long term health effects for children Where are we going?.... What does our future hold?.... Mortgage failures Penny auctions Mortgage failures Human Cost The Psychological Impact Undermines the traditional authority of the male breadwinner Women work more cheaply Jobs likely survive hard times Male reaction Emotional withdrawal Violence Drinking Suicide rate between % Objective Analyze President Hoovers philosophical and leadership response to the market crash and depression. Hoovers beliefs No Government involvement Private solutions Rugged- Individualism and Welfare is not useful for society Hoovers beliefs The economy would fix itself a temporary slump This is a business cycle Hoover and the Homeless Raised $15 million through radio campaign Built tent cities for 600,000 homeless Hoovervilles 1931 LA had 70,000 nonresidents, jobless, & homeless men 1,200 arriving everyday Hoovers Actions 1931 Presidents Organization for Unemployment Relief (POUR) encouraged local groups to raise money to help the unemployed Federal aid would only be a disservice He focused on restoring business confidence Reconstruction Finance Corporation (RFC) Provided govt credit to ailing industries like banks, RRs, etc. to stimulate economic activity Problem was low consumer demand, not supply! Protests of 1932 Fords River Rouge Plant Communist organizers 4 killed & 50 wounded Farmers Holiday Association Raise prices by destroying food Bonus Army $1,000 due in 1945 20,000 camp in capital 2,000 linger and MacArthur reacts Farmers Holiday Association Meeting Bonus March Streaming Video The WWI Bonus Army Bonus Marchers Bonus Marchers leaving General McArthur directing removal of Bonus Army Mr. Hoover Hooverball Hoover encourages Americans to remain confident Americas Reaction to Hoover Democrats 1930 mid-term elections Win HoR for 1 st time since 1916 Gain 8 seats in the Senate 1932 nominate FDR Gov. of NY Pledges a new deal for the American people Overwhelming victory