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Chapter 14 Section 1


... market crash was the beginning of the Great Depression (the period from 1929 ... G. Causes of the Great Depression. 1. Tariffs and war debt policies. 2. ... – PowerPoint PPT presentation

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Title: Chapter 14 Section 1

Chapter 14 Section 1
  • The Nations Sick Economy

I. Economic Troubles on the Horizon
  • Industries in Trouble
  • Textiles faced competition from foreign producers
    in Japan, India, China, Latin America
  • Mining lumber expanded during WWI, but demand
    went down afterwards
  • Even industries that had boomed started to slow
    down (such as automobiles, construction,
    consumer goods)

  • B. Farmers Need A Lift
  • 1. During WWI, demand for wheat and corn had
    soared, farmers planted more crops, took out
    loans for more land new equipment.
  • 2. After the war, prices/demand fell 50 or
  • 3. To compensate for prices, farmers grew more
    to sell more, didnt work.
  • 4. Farmers who had taken out loans couldnt pay
    them back, then would lose farms, banks started
    to fail.

  • 5. Congress tried to help by passing a bill
    calling for price supports (govt would support
    price at market value)
  • -govt buy surplus crops
  • - govt then sell crops on world market for
    lower prices
  • -govt would place tax on domestic food sales
    to make up the money, passing on the cost to
  • 6. President Coolidge vetoed it in 1927 1928

U.S. Consumers (US)
  • C. Consumers Have Less Money to Spend
  • 1. By the late 1920s, consumers were buying less
    because of rising prices and overbuying on credit
    in previous years.
  • 2. Factories and farms are producing more.
  • D. Living on Credit
  • 1. People appeared prosperous, but many were
    living beyond their means through credit (an
    arrangement in which consumers agreed to buy now
    and pay later for purchases that included
    interest charges)
  • 2. Some had problems paying back debt, cut back
    on spending to save money.

  • E. Uneven Distribution of Income
  • 1. During the 1920s, nearly half of the nations
    families earned less than 2000/yr., (the minimum
    needed for a decent standard of living)
  • 2. Even families making 2x the minimum could not
    many of the products that manufacturers produced
  • 3. The rich did very well, income for top 1
    rose by 75, rose by 9 for the rest of Americans
  • 4. Most Americans could not consume the flood of
    goods that factories produced.
  • Rich get richer, while the poor get poorer.

  • F. A New President (Election of 1928)
  • 1. Herbert Hoover vs. Alfred E. Smith
  • 2. Sec. of Commerce and Mining Engineer from
    Iowa, never ran for office vs. career politician
    from NY, both from poor families
  • 3. Hoover won because of his involvement during
    the prosperous 1920s (and Smith was Catholic,
    against Prohibition, had a heavy Brooklyn

II. Stock Market Comes Tumbling Down
  • Dreams of Riches in the Stock Market
  • During the 1920s, stock prices rose steadily
    (Bull Market), people wanted a share
  • Investors engaged in speculation (bought on a
    chance that they may make a quick or a large
    profit, ignoring the risks)
  • Unrestricted buying and selling fueled an upward
    spiral, wealth was up on paper, but not to the
    real worth of the companies

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  • 4. Many investors also started buying on margin
    (paying a small percentage and borrowing the
  • 5. Worked as long as prices rose, because one
    could sell their stock at a higher price and pay
    off debt
  • 6. If stock declined, no way to pay off debt.

  • B. Black Tuesday
  • 1. Early Sept. 1929, prices peaked and then
    began to decline
  • 2. Oct. 24, stocks plunged downward, many
    panicked and sold their shares
  • 3. Oct. 29, 1929, day known as Black Tuesday,
    the bottom fell out of the market, people raced
    to sell their stock at any price
  • 4. As people sold, the prices went lower
  • 5. Investors who had bought stock on credit
    acquired huge debts as the prices went down.
  • 6. A record 16 million shares were sold on that
  • 7. By mid-November, investors had lost 30

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  • C. Causes of the Great Depression
  • 1. The stock market crash was the beginning of
    the Great Depression (the period from 1929 to
    1941, in which the economy was in severe decline
    and millions of people were out of work)
  • 2. Some causes
  • -Republican economic policies (trickle down
    decline in international commerce)
  • -crisis in the farm sector
  • -weak unregulated banking
  • -unequal distribution of wealth

III. Financial Collapse
  • After the crash, many Americans panicked and
    withdrew their money from banks, forcing some
    banks to close.
  • Many banks had lost money in the market, just as
    individuals had, and by 1933, around 6000 banks
    had failed.
  • Wiped out about 9 million individual savings

  • D. Hit businesses equally hard. From 1929 and
    1932, the gross national product was cut nearly
    in half (109 billion to 59 billion) about
    90,000 businesses went bankrupt
  • E. Millions of workers in turn lost their jobs.
    One out of every four workers was without a job.
    Those who did have a job had reduced hours and
    low wages.

  • F. Worldwide Shock Waves
  • -Many European countries had suffered throughout
    the 1920s trying to recover from WWI (damage
  • -European goods hard to sell in U.S. U.S.
    goods hard to sell in Europe
  • -Congress passed the Hawley-Smoot Tariff (1930),
    which established the highest protective tariff
    in U.S. history
  • made industries that relied in trading
    overseas worse
  • within a few years, world trade had fallen
    more than 40

  • G. Causes of the Great Depression
  • 1. Tariffs and war debt policies
  • 2. Crisis in the farm sector
  • 3. Easy Credit and lack of regulation
  • 4. Unequal distribution of wealth