It all comes crumbling down The Great Depression begins
Making connections Take a minute and write down what you know about the current recession we are in. How has it affected your or your family’s life
Think about it You have a job that pays you $200 a week. You are living on your own and can barely get by with rent and bills.
Think about it You go to the bank and you get a $2000 loan. You decide to buy an iPad, iPhone, new shoes and clothes. You spend half the money.
Think about it You lose your job! Now what happens? You still owe the bank $2000. Move out, sell possessions, no car or place to live.
Superficial Prosperity People spending money they didn’t have, making America look wealthier than it actually was. On the surface, things looked great. But in reality, America had major problems.
Beneath the Boom • Farmers did not prosper - new machines produced more which lowered prices. • The black population did not prosper - farmers laid them off. Many moved North looking for work. • Recent immigrants did not prosper - they were given low paid jobs and lived in overcrowded conditions. • Workers in ‘old’ industries (eg. mining, textiles) did not prosper - they were low paid.
1. Troubled Industries Key industries were not making money. Old and outdated Housing market failing, taking along industries with it. Domino Effect
2. Farming Crisis During WW1, demand for crops rose and caused prices to rise. Farmers took out loans for land and equipment After WWI, the demand for crops fell.
Farming Crisis Farmers produced more than they were able to sell Farmers lost their land
3. Availability of easy credit Credit: an arrangement in which consumers agreed to buy now and pay later. Credit was available through an installment plan. (Pay over a period of time)
Availability of easy credit People were mounting up loads of DEBT. People had trouble paying it off. This led to cut back on spending.
4. Unequal distribution of wealth People were either very wealthy or very poor. Incomes remained stagnant.
Unequal distribution of wealth Too little money in the hands of working people who were the majority of consumers.
New President Herbert Hoover wins in 1928 Republican. All about big business, Little government involvement
Stock Market Crash of 1929 Investing in the stock market became the thing to do . Many Americans were unaware of the economic situation.
Current Economic Situation Economy begins to stall Leads to workers to be laid off Factories shut down Leads to even less spending of consumers
Dreaming it Rich Bull market. Stock prices kept going up Speculation: engaging in risky business transactions on the chance of a big profit. Good on paper, but in reality the price of stocks had little to do with how much the stock paid.
Dreaming it rich Buying on margin: paying a small percentage of the stock’s price and hoping the profit covers the rest. Only worked if prices rose.
The Coming Crash Starting September of 1929, STOCK PRICES DROP. Thursday, October 24th- LOSS OF CONFIDENCE. 13 million shares sold Banks decide to help, buy millions of shares for more than they are worth.
BLACK TUESDAY Tuesday, October 29, 1929 Bottom falls out 16 million shares sold. No buyers found. Ticker tape machines break due to pressure. Many investors are ruined.
GREAT DEPRESSION BEGINS Stock market crash signals the beginning of the Great Depression. Period from 1929 to 1941 in which the economy was in severe decline and millions were out of work.
Banks Fail American panicked and withdrew their money. Banks had no money to give them, lost from investment. By 1933, 6,000 banks closed.
Businesses Fail GDP (nation’s total output of goods and services) cut in half 85,000 business went out business
Unemployment Rises Unemployment rises 25% in 1933
Families and people suffer Many forced to foreclose, build shantytowns, makeshift houses out of scraps. Soup kitchen and bread lines
Families and people suffer Men look for work, some abandon families. 2 million hobos. No direct relief: no government programs available Suicide rose by 30% Brother...
Dust Bowl Midwest region made worthless for farming because of drought and dust storms. People left the Midwest, went west.
Hoover’s Response Did not allow direct government relief Americans frustrated – call shantytowns “Hoovervilles” Provides relief to banks, businsses (RFC) and lowered mortgage rates (Federal Home Loan Act) Too little, too late
Hoover Believed economy would fix itself
Bonus Army Group of WWI veterans that marched on Washington demanding funds promised to them. The government shoots down the bill Hoover gasses the veterans to force them to leave
What should the government do? 1. Direct Relief 2. Financial Reform 3. Economic Recovery
Direct Relief Cash payments or food provided by the government to the poor
Financial Reform Fix the banks and stock markets by putting in regulations and reforms so this will not happen again
Economic Recovery Government should create jobs for its citizens!