The Great Depression The Nation s Sick Economy Chapter 2

1
The Great Depression

• The Nations Sick Economy
• Chapter 22
• Section 1

2
Economic Prosperity of the 20s

• No one believed that the economic prosperity of
  the Roaring 20s would ever end.
• The signs were everywhere, but
  ignored by just
  about everyone

3
Economic Prosperity of the 20s

• During WWI, farmers extended themselves, relying
  on the govt who was buying everything they could
  grow to feed the troops
• Once the war ended, farmers had surplus crops
  they could not sell and prices fell

4
Economic Prosperity of the 20s

• Soon, industries faced the same problems of
  over-production
• Big spending Americans bought appliances, but did
  not need to continue to buy additional ones
• Supplies stockpiled and workers worked less hours

5
Economic Prosperity of the 20s

• Other large industry leaders of 1900 were being
  replaced by new methods
• Railroads were replaced by cars, trucks and buses
• A peacetime America does not need massive
  supplies of steel and coal.

6
Economic Prosperity of the 20s

• But people did not buy car after car so even
  automobile manufacturers began to sell fewer
  cars, needing fewer workers to make more
• The housing market fell as people made less money

7
Economic Prosperity of the 20s
8
Helping the Farmers

• Congress tried to enact price supports but Pres.
  Coolidge vetoed it twice (with little sympathy
  for the farmer)

9
C h a r g e ! ! ! !

• People in the 20 took advantage of buying on
  credit
• Easy credit allowed Americans to live well above
  their means (at least temporarily)
• The installment plan lets customers pay off large
  purchases over months or years

10
C h a r g e ! ! ! !

• When peoples incomes declined, they could not
  pay off their monthly payments
• Many charged goods thinking that their income
  would rise in the 20s

11
In reality..

• The rich got very, very rich
• The bottom 70 of the population saw their buying
  power decline in the 1920s

12
In reality..

• 1. Uneven distribution of income the top 5 of
  the population controlled 33 of the wealth
• During the 20s, disposable income for the
  wealthiest1, increased by 63 - for the bottom
  93 it decreased by 4
• Economists believe that if the 93 were better
  paid, the Depression would not have been as severe

13
1928 Election

• Rep. Herbert Hoover
• vs
• Dem. Alfred E. Smith
• Hoover ran on hope and prosperity

14
Stock Market 101

• When a company wants to expand, they can sell
  shares of their stock (up to 49 of the companys
  value)
• The money goes to the company
• All stock sales after the initial one (IPO) are
  NOT profits or losses for the company

15
Stock Market 101

• Future sales of that stock are made based on the
  value (real or perceived) of the company.
• The owner of the stock (not the company) gets the
  profit (or loss)

16
Stock Market in the 1920s

• People bought and sold stock frequently (like
  day-traders)
• The value of the companies the stock represented
  may not have increased but it was perceived that
  it did
• People bought stock for quick profits

17
Stock Market in the 1920s

• The Dow represented the value and activity of 30
  cross-sections of Americas stock
• Stock prices rose through the 1920s (bull market)
• Speculators bought stocks and expected profits
  within days or weeks

18
Stock Market in the 1920s

• Because of the rising prices, people bought on
  margin
• Margin Paying only a percentage of the stocks
  value and borrowing the rest.
• Stockholders waited for prices to rise sold the
  stock and repaid their debt.
• Unless.

19
Stock Market in the 1920s

• The stock prices didnt rise
• If stock values decline, margin buyers must put
  more money down on the stock they own
• If they cannot, the stock is sold but at a loss
  for the stockholder and the brokers

20
The C R A S H of 29

• In September the stock market fluctuated wildly
• Edgy investors pulled their money out, causing
  prices to fall rapidly
• Panicked investors unloaded

21
The C R A S H of 29

• On Friday, the president asked millionaires to
  invest heavily in stocks
• They did, but it did not prevent Black Tuesday

22
The C R A S H of 29

• Black Tuesday, Oct. 29, the bottom fell out of
  the stock market
• Everyone tried to sell at once but there were no
  buyers at any price
• People were stuck with worthless shares and in
  debt

23
The Great Depression

• The stock market crash marked the beginning of
  the Great Depression, which lasted until 1940
• As bad as the economy was in 1930, it continued
  to worsen

24
The Great Depression

• By 1933, 25 of Americans were unemployed
• This was before we had Social Security,
  unemployment insurance or welfare.
• This was exacerbated because the economy in
  Europe had not recovered after WWI

25
The Great Depression

• Look at the graphs on page 676
• What happens when banks fail?
• What happens when businesses fail?
• What happens when unemployment rises?
• What happens when people spend less?

26
What Did Hoover Do?

• No one expected the government to do anything to
  remedy the economy they never had

27
What Did Hoover Do?

• Congress passed the Hawley-Smoot Tariff to
  protect American industries from foreign imports
• It had the opposite effect by reducing the amount
  of money foreign countries had to spend
• Others passed their own tariffs

28
Causes of the Depression

• 1. Tariffs reduced European income
• 2. Farm prices reduced
• 3. Availability of easy credit
• 4. Unequal distribution of income

29
Farm Prices in the 1930s
30
Hardship and SufferingDuring the Depression

• Section 2

31
Dust Bowl

• Over-plowed land lost its root structure to keep
  soil in place
• The droughts and wind of the 1930s blew
  exposed
  dirt eastward

32
Dust Bowl

• Thousands left their farms and headed for
  California
• There was no work for them there either

33
Effect on People

• People who lost their homes moved to
  shantytowns
• Churches were the main charities
• People lined up for free soup, bread and coffee
• Minorities were hit hardest since they were at
  the bottom of the economic ladder in 1928

34
Effect on People

• Many farmers lost their land
• Those who did not, could at least grow food for
  themselves
• Many turned to tenant farming, on the land that
  they previously owned

35
Effect on Men

• Men were the providers for the family
• Unable to do so, many left their families
• Some became hobos, riding the rails

36
Effect on Women

• Since women earned less, often they could find
  jobs when their husbands could not
• This bred resentment

37
Effect on Children

• Schools closed as tax money to run them dried up
• They were homeless with their parents
• Some got low paying jobs to help the family

38
Effect on Children

• Some left home and hopped the rails
• This meant one less mouth to feed for their
  parents

39
Effect on Society

• The suicide rate rose more than 30
• Three times more people were admitted into mental
  hospitals
• People stopped planning for
  their future, worrying about
  the immediate instead

40
Effect on Society

• The effects of the depression stays with the
  people who lived through it for their entire lives

41
Hoover Struggles with the Depression

• Section 3

42
Hoovervilles

• Hoover felt it was best to do nothing to help the
  economy
• People named the shantytowns, Hoovervilles

43
Hoovervilles

• Empty pockets were reversed and called Hoover
  Flags
• Hooverville, NY

44
Hoover

• Hoover hesitated instituting any
  government assistance because
  he felt it would be humiliating and take away the
  rugged individualism that Americans were known
  for
• He asked businesses to not cut wages, hours or
  employees

45
Hoover Dam

• The economy continued to slide so Hoover proposed
  a dam project, Boulder Dam.
• It didnt touch needs
  of the
  millions of unemployed.

46
Mid-Term Elections 1930

• Unhappy Americans elected Democrats
• Democrats controlled the House
• The Republicans controlled the Senate by only 1
  vote

47
Everyone Blames Hoover

• Mellon pulled the whistle
• Hoover rang the bell
• Wall Street gave the signal
• And the country went to hell

48
Hoover Takes Action

• By 1931 Hoover saw that he needed to do something
  to stimulate the economy
• The Federal Farm Board and the National Credit
  Corp were the first to be used

49
Hoover Takes Action

• Next, Hoover passed the Federal Home Loan Bank
  Act and Reconstruction Finance Corp.
• It was too little, too late and the Democrats
  were ready to control the government

50
Bonus Army

• World War I soldiers were promised a pension to
  take effect in 1945.
• The army wanted their bonuses immediately and
  marched to DC to get the 500 they were promised

51
Bonus Army

• With no where to go, they camped near the White
  House

52
Bonus Army

• Instead of paying the ex-soldiers, Hoover ordered
  the military to attack the men, their wives and
  children
• With the election only a few months away,
  Hoovers fate was sealed.