Causes of the Great Depression

1. Causes of the Great Depression

2. Warm-up • What would be your plan to save the country if you were president during the Great Depression?

3. Announcements • Tests returned • Unit 2 Test Thursday March 10th • Unit 2 Debate Wednesday March 9th • Wrap-up of yesterday

4. Unit 2 Debate Topic • Government involvement in the economy is always a good thing for the consumers (or people of a country).

5. Sherman Anti-Trust: • This was passed in 1890 and made trusts illegal • People felt that Big Business leaders were getting too powerful and making too much money • It was meant to limit the power of Big Businessmen, but didn’t work out that way. • Big Business lawyers turned the law around to prosecute striking unions • This means that Big Business would say that strikes by unions (groups of people who all work for the same business; it protects the rights of the workers) were breaking this act.

6. Questions Broken Down 1.)The Sherman Anti-Trust act didn’t work. How could Big businesses be regulated without too much government intervention? 2.) Do you think the government should have any say in big business? When should the government be involved? When should it stay out of business?

7. Sherman anti-trust cartoon Standard Oil was a one of the largest monopolies in the early 1900s. 1. Describe what is going on in this cartoon. 2. Why do you think Standard Oil is an octopus? 3. What are in the tentacles of the Octopus? 4. How does the Octopus represent a monopoly? 5. Did the author of the cartoon support standard oil or not?

8. Rise of Unions • In order to combat the poor working conditions in factories, unions began to form. • Unions are groups of workers that come together to collectively bargain for work hours, pay and other working conditions. • Use your Unions worksheet and your yellow textbook to learn more about unions. Complete the definitions and key points only!

9. Question of the Day • Can the government regulate how a company does business? What are positives and negatives of this type of government intervention?

10. Question of the Day • What was the role of Laissez-Faire economics in the start of the Great Depression?

11. What was life like in the 1920s? • Lots of spending that people couldn’t afford. • Rise of credit cards • New technologies • Consumerism

12. What is the Stock Market? • The Stock Market is where you buy and sell stocks (which are parts of a company). • An individual stock is a share. • You buy the share at a certain price and then hope that the price goes up so that you can sell it for a profit. • Stocks go up because a company is thought to be Profitable

13. Causes of the Great Depression • Unequal distribution of income- some people have a lot of money while others have none • Buying on credit-using credit cards and then not being able to pay it back • Buying stocks on margin-borrowing money to buy stocks and hoping they rise • Inflated real estate prices-houses are selling for more than they are worth • Overproduction in industry and agriculture- we made and grew more than we could sell

14. Stock Market Crash of 1929 • In the days leading up to "Black Thursday”, the market was severely unstable. • There were periods of high selling split up by rising prices and recovery • On Black Thursday the Stock Market dropped 13%

15. Crowd on Wall Street Right after the Crash

16. Floor of the Stock Exchange

17. People after the Crash

18. How Banks Work • Banks take in money when you or other customers make deposits into your savings account • Banks then use the money you’ve deposited (put in) into a savings account in order to give loans to other people • Loans are re-paid, and you can still get your money out of savings

19. Bank Reserves • Definition: When banks take in deposits that they don’t then loan out. This means your money stays in the bank.

20. U.S. Reserve System • A Fractional Reserve banking system: this means that banks take in money and lend it out. There isn’t even enough money –in cash—in the bank for everyone to take all their money out—the bank’s already lent it out to other people in the form of loans

21. Loans • Loans are when you borrow money from the bank. The banks lends you the money, which they got from people who deposited their savings. • People usually spend loan money right away, on things like homes, cars, or college payments.

22. Withdrawals • Because only a small fraction of the bank’s customers’ deposits are kept on reserve (in the actual bank) not everyone can get their money out in cash in one day. • This usually isn’t a problem, but WAS during the Great Depression

23. Bank Failure • This occurred during the Great Depression, when banks could not meet the demands of people who wanted all their money back in cash • Remember, banks had given out that money in the form of LOANS, which take time to pay back

24. Bank Run • A situation where all the depositors (bank customers) go to the bank in order to get their money back at the same time. • The bank does not have enough cash due to having lent it out in loans to give everyone their money

25. Bank Runs

26. Bank Run

27. Bank Panic • Bank runs can lead to bank panic in which people no longer trust the banks or lose confidence in them • When this happens, banks are harmed because people will no longer give them their money in savings • As people remove their money from banks, the money supply (amount of money being used) shrinks

28. The Role of Government, according to Hoover: • Hoover believed in Laissez-faire government. • Laissez-faire is a French term meaning “hands-off”. This means that government does not implement policies to deal with economic problems; it just lets the markets work themselves out.

29. Hoover

30. Hoover’s Trade Policy: Smoot-Hawley Tariff Hoover tried to protect American production by getting Congress to pass the Smoot-Hawley Tariff in 1930, right after the crash of the stock market. The Smoot-Hawley Tarriff was supposed to: • Protect farmers through high tariffs, so things from other countries could not be imported • Protect American production of goods • Essentially force people to buy American

31. Hoover’s Business Policy: Laissez-Faire • Hoover also believed in a “hands-off” policy when it came to how businesses were run • He initially did not support those who were out of work because he feared that Americans would become lazy • Many became resentful towards Hoover because he did not help them like they hoped he would

32. Reconstruction Finance Corporation (RFC) Hoover believed providing money to American businesses was the best solution, so he established the RFC in 1932. The RFC: • Loaned money to businesses and banks to keep them in operation • Saved many corporations • Spent money on public works projects, like building hospitals, roads, and schools

33. Hoover & Farming • The Agricultural Marketing Act was passed in 1929. This established the Federal Farm Board, which bought surplus crops and made prices of farm products go up. • This plan ultimately failed and the Federal Farm Board spent nearly $180 million before it was ended in 1933

34. Hoover & Housing • Hoover tried to give indirect aid to homeowners who were at risk of losing their homes • In 1932- he supported the Federal Home Loan Bank Act, which provided money to banks, financial institutions, and insurance companies to provide mortgages. • Hoover did this in order to decrease the amount of foreclosures on homes. • Many people claimed that this was, “too little, too late”

35. Hoovervilles • Shanty-towns that arose throughout five major areas in the US due to the amount of people without homes • These were named for and blamed on President Hoover

36. The Bonus Army • Veterans of WWI suffered greatly during the Great Depression • 1924- before the Depression- Congress had passed the Bonus Bill; this said that all WWI veterans dwould receive payments, an the money would be put into a fund until 1945. • The depression really hurt many veterans, so they demanded the money right away. • Congress passed a bill to loan veterans up to 50% of their money. • Veterans were so angry that they marched on Washington and protested; they did not receive their money and a riot began.

37. Background on FDR • Franklin Delano Roosevelt was governor of New York and ran for president in 1932. • He promised direct aid to the people of the United States and won the election of 1932. • When he got into office in 1933 he promised to create drastic change in his first 100 days.

39. Roosevelt’s theory • Roosevelt did not believe in Laissez-faire economics. • He believed in Keynesian economics which states that the government must get involved in the economy to stabilize it and re-start it in times of trouble.

40. Roosevelt’sResponse • This group of programs was passed during his first 100 days in office and was called the New Deal • The New Deal was FDR’s plan to end the depression.

42. Roosevelt’s Programs • Roosevelt started a series of programs to directly aid Americans. • He created the Federal Deposit Insurance Corporation (FDIC) to protect bank accounts from failing banks. • He also went after unfair business practices like monopolies by creating the National Industrial Recovery Act.

44. Roosevelt’s programs (continued) • In addition he created the Tennessee Valley Authority (TVA) and the Civilian Conservation Corp (CCC) that provided jobs to unemployed workers. • They created public works projects like providing electricity and provided rural workers with more stable jobs.

46. Was Roosevelt Effective in ending the Depression? • Roosevelt moved along in the right direction and was more effective than Hoover. • We will learn however that the Depression does not completely end until the start of World War II in 1939.

47. Exit slip • 1. What is a bank failure? • 2. What is a bank run? • 3. How did bank panic contribute to the collapse of the nation’s banking system? • 4. How did Hoover respond to the Great Depression? Was it successful? Why? • 5. How did Roosevelt Respond to the great depression? • 6. Name 3 programs that Roosevelt implemented and what each did.

49. Warm-up • What would have been the hardest part of living in America during the Great Depression? Why?

50. Vocabulary • Dust Bowl- the term for the extreme dust storms and drought in the 1930s that prevented farming in the mid-western part of the United States.