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THE GREAT DEPRESSION BEGINS

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THE GREAT DEPRESSION BEGINS By the late 1920s many Americans were used to year after year of economic expansion. It was easy to believe that the prosperity of the ... – PowerPoint PPT presentation

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Title: THE GREAT DEPRESSION BEGINS


1
THE GREAT DEPRESSION BEGINS
By the late 1920s many Americans were used to
year after year of economic expansion. It was
easy to believe that the prosperity of the 1920s
would last forever. The crash at the end of the
decade shocked many Americans.
Photos by photographer Dorothea Lange
2
LONG TERM CAUSES THE NATIONS SICK ECONOMY
As the 1920s advanced, serious problems
threatened the economy while Important industries
struggled, including
  • Agriculture
  • Railroads
  • Textiles
  • Steel
  • Mining
  • Lumber
  • Automobiles
  • Housing
  • Consumer goods

3
FARMERS STRUGGLE
  • No industry suffered as much as agriculture
  • During World War I European demand for American
    crops soared
  • After the war demand plummeted
  • Farmers increased production, sending prices
    further downward

Photo by Dorothea Lange
4
CONSUMER SPENDING DOWN
  • By the late 1920s, American consumers were buying
    less
  • Rising prices, stagnant wages and overbuying on
    credit were to blame
  • Most people did not have the money to buy the
    flood of goods factories produced

5
GAP BETWEEN RICH POOR
  • The gap between rich and poor widened
  • The wealthiest 1 saw their income rise 75
  • The rest of the population saw an increase of
    only 9
  • More than 70 of American families earned less
    than 2500 per year

Photo by Dorothea Lange
6
THE STOCK MARKET
  • By 1929, many Americans were invested in the
    Stock Market
  • The Stock Market had become the most visible
    symbol of a prosperous American economy
  • The Dow Jones Industrial Average was the
    barometer of the Stock Markets worth
  • The Dow is a measure based on the price of 30
    large firms

7
STOCK PRICES RISE THROUGH THE 1920s
  • Through most of the 1920s, stock prices rose
    steadily
  • The Dow reached a high in 1929 of 381 points
    (300 points higher than 1924)
  • By 1929, 4 million Americans owned stocks

New York Stock Exchange
8
  • The stock market
  • the public invests in cos. by purchasing stocks
    in return for this they expect a profit
  • b/c of booming 1920's economy, were plentiful,
    so banks were quick to make loans to investors
  • also investors only had to pay for 10 of the
    stock's actual value at time of purchase
  • this was known as BUYING ON MARGIN, and the
    balance was paid at a later date

9
  • this encouraged STOCK SPECULATION - people would
    buy and sell stocks quickly to make a quick buck
  • b/c of all this buying selling, stock value
    increased (Ex G.E stock 130 ? 396/share)
  • this quick turnover didn't aid cos. ? they needed
    long term investments so they could pay bills
    (stock value was like an illusion)
  • unscrupulous traders would buy and sell shares
    intentionally to inflate a given co.'s stock
    value
  • all of this gave a false sense of
    security/confidence in the American market

10
PROBLEMS WITH THE RISING STOCK MARKET
  • By the late 1920s, problems with the economy
    emerged
  • Speculation Too many Americans were engaged in
    speculation buying stocks bonds hoping for a
    quick profit
  • Margin Americans were buying on margin
    paying a small percentage of a stocks price as a
    down payment and borrowing the rest

11
THE 1929 CRASH
  • Stocks peaked in summer, 1929
  • Prices started to drop as frightened investors
    who bought stocks on margin rushed to sell their
    stocks in order to pay off their loans
  • Tuesday, October 29th Black Tuesday stock
    market crashed because so many people wanted to
    sell and so few wanted to buy
  • People who had bought on margin (credit) were
    stuck with huge debts

12
By mid-November, investors had lost about 30
billion
13
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14
  • a 2nd major problem uneven dist. of wealth
  • 0.1 at top owned as much as bottom 42 of
    American families (42 below poverty line)
  • of the 58 above the poverty line, most fell into
    the middle class category - they were not
    wealthy they had jobs b/c of the
    industrialization consumerization of the
    American market place
  • this middle class depended on their salaries and
    when productivity declined they lost their jobs
  • and b/c of low savings, they had to cut back on
    their purchases
  • this decline in consumption among the middle
    class ruined the whole country

15
  • Pres. Hoovers responses
  • he didn't believe that the gov't should play an
    active role in the economy
  • he persuaded bankers/business to follow his
    policy of VOLUNTARY NON - COERCIVE COOPERATION
    where he gave tax breaks in return for private
    sector economic investment
  • Hoover also organized some private relief
    agencies for the unemployed
  • he worked out a system with European powers that
    owed U.S. money as a result of WWI debts
    HOOVER MORATORIUM - put a temporary stop to war
    debt reparations payments
  • Euro. countries were to purchase American goods
    instead to stimulate American economy

16
  • in early 1931 these measures appeared successful,
    but then......the TARIFF WARS
  • Democrats in Congress passed a high tariff (SMOOT
    HAWLEY) to protect U.S. industry (hoped to
    stimulate purchasing of U.S. goods)
  • this turned out to be a fatal error...
  • Congress did not understand that the world had
    become a GLOBAL ECONOMY
  • in retaliation other countries passed high
    tariffs and no foreign markets purchased American
    goods, so U.S. productivity decreased again

17
THE GREAT DEPRESSION
  • The Stock Market crash signaled the beginning of
    the Great Depression
  • The Great Depression is generally defined as the
    period from 1929 1940 in which the economy
    plummeted and unemployment skyrocketed

Alabama family, 1938 Photo by Walter Evans
18
FINANCIAL COLLAPSE
  • After the crash, many Americans panicked and
    withdrew their money from banks
  • Banks had invested in the Stock Market and lost
    money
  • In 1929- 600 banks failed
  • By 1933 11,000 of the 25,000 banks nationwide
    had collapsed

Bank run 1929, Los Angeles
19
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