The Great Depression

1. The Great Depression

2. The Great Depression • “Brother Can You Spare A Dime” • By Bing Crosby • Performed By Al Jolsen • How did the working class Americans feel about the “hard times” they were facing in the 30’s? Soup line in Chicago 1933 Brother Can you Spare a Dime Song

3. The Great Depression • the gov. had let them down • they are forgotten now • they did everything their country had asked of them • cannot find a job • “What did I do wrong?”

4. The Great Depression • Why American were optimistic during the 1920’s • highest standard of living • medical advances increased life expectance • males 59 / women 53 • stock market continued to go up • real wages had increased

5. The Great Depression • women were going to college • unemployment falls below 4% • heroes of the day were business men • they are saying everything is fine • unusually high confidence in the business world • welfare capitalism • employers provided workers with raises and benefits

6. The Great Depression Contributing Factors that lead to the Great Depression

7. The Great Depression 1. Decline in Foreign Trade • high tariffs wanted people to buy American goods • built a tariff wall • Fordney-McCumber Tariff - 39% • Hawley-Smoot Tariff - 60% • Added an additional 75 farm products and 925 industrial items to the list • How would this lead to the Great Depression?

8. Answer… • Hurt US sales over seas • Other countries cannot sell their goods in US • People in other countries cannot make money needed to buy American made goods being sold in their countries • American businesses loss money because they have lost an overseas market

9. The Great Depression 2. Increase in Labor Saving Technology • more goods being produced with fewer labor • How would this lead to the Great Depression?

10. Answer… • More and more people were being laid off from work • Machines were doing the jobs that were once done by people

11. The Great Depression 3. Decline in Purchasing Power • wages and salaries couldn’t keep up with the rising prices • Real wages were rising more slowly than prices of goods • How would this lead to the Great Depression?

12. Answer… • People were making less money • Had less money to spend • Were not buying goods • Businesses were not selling goods • Businesses would lay workers off

13. The Great Depression 4. Uneven distribution of wealth • mainly the rich getting richer • Poverty line was <$2,000 • 60% of Am families were at or below that line in 1929 • 80% had no savings • How would this lead to the Great Depression?

14. Answer… • Had no money to spend on luxury goods • Could only buy for their basic needs • If they had more money they probably would have spent most of it • Poor people spend a greater percent of their income than rich people • Greater spending would have meant a boost in the economy

15. The Great Depression • Bank Failures • 1929 = 642 • 1930 =1352 • 1931 = 2294 • Estimated 1 billion dollars had been w/drawn and placed in shoe boxes • There was no insurance for depositors - How would this lead to the Great Depression?

16. Answer… • When money was needed there was no money • Banks had failed and could not loan money to people • Depositors lose their money they had less to spend • Fewer banks meant fewer businesses loans • No banks were to be trusted even the healthy ones

17. The Great Depression 6. Overproduction in Agricultural and Industry • farmers’ depression started in early 1920’s • overproduced during WWI to feed Europe • Farmers had borrowed money to buy more land and more machinery • not needed now that war was over and Europe was feeding itself • crop princes fell 50% • How would this lead to the Great Depression?

18. Answer… • Many lost their homes and farms because they could not pay back their mortgages • Close to 50% of families in Am were farm families in the 1920

19. The Great Depression • In Industry • late 20’s warehouse had piled up with un-bought consumer goods • overproduction caused some industries to slow • auto industry slumps in 1925 • housing fell in 1928 • How would this lead to the Great Depression?

20. Answer… • Many businesses laid off workers • Expected the remaining workers to take on additional work

21. The Great Depression 7. Installment buying and Buying on Credit • people buy items while paying from them (w/ interest) over many months • people flocked to buy many new products whether or not they could afford them • advertising made new goods irresistible • increase in personal debt • How would this lead to the Great Depression?

22. Answer… • Done in moderation it can boost economy but a high level can hurt the economy • Producers do not get signs that supply is outrunning demand • Workers who have been laid off are unable to complete their installment purchases • This further hurts businesses

23. The Great Depression 8. Buying on the Margin • paying a small % of a stock’s price as a down payment and borrowing the rest • 10% down borrowed 90% from broker who charged HIGH interest rate • as stocks went up - sell - pay back the broker • broker could demand payment at any time (call) • How would this lead to the Great Depression?

24. Answer… • If people started to sell due to a panic the price of stocks would drop • This resulted in a loss for the broker and the bank who lent the broker money • The bank loan had been made with the depositors’ money • The depositors really lost

25. The Great Depression • Stock Market Crash • Black Tuesday on Oct 24, 1929 • wave of selling as people who had brought on the margin were called • 13 million shares changed hands • banks and insurance companies bought in order to stabilize

26. The Great Depression 9. Black Tuesday Oct 29, 1929 • people and corporationsalike tried to sell stocks • record # of stock sold - 16 million • panic continues for two weeks • total lost 30-40 million • How did this lead to the Great Depression?

27. Answer… • If the stock market falls business investment declines because confidence is shaken • Banks are less likely to make loans • Spending by the rich declines because they either have less money and/or are unsure about future earnings • Spending by the poor declines because they have lost faith in the economy and/or they will have lost their job

28. The Great Depression Had Begun