The Great Depression Begins

The Great Depression Begins Chapter 14-1

Economic Troubles on the Horizon • As the 1920’s progressed serious problems began to appear on the economic front • Many could not earn a decent living, many businesses began to struggle, & farmers produced a surplus of crops & livestock causing prices to hit bottom

Industries in Trouble • The prosperity of the ‘20’s marked the cracks that began to show by the end of the decade • Key industries such as the steel industry & railroads barley showed a profit • Mining & lumbering industries that had prospered during the war years now severely struggled • Coal mining was particularly hit as new forms of energy were developed • Perhaps the most important indicator was the fate of the housing industry which new builds would take a drastic fall

Farmers Need a Lift • Farmers took a huge hit as prices would fall to their lowest levels in decades • During the war farmers were able to sell their crops to the government as well as waring nations • Also during the war new technology & farming practices increased production to all time levels • In order to keep up with demand farmers took out loans for equipment, seed, etc. • When the demand dropped & prices fell farmers were left with debt & no way to meet their obligations causing many to lose their farms • Congress tried to pass legislation to buy surplus farm products, but it was vetoed by President Coolidge, twice

Consumers Have Less Money To Spend • By the late 1920’s Americans were buying less goods mainly due to rising prices & stagnant wages • There was also an unbalanced distribution of wealth as a minority of Americans held the majority of wealth which led to many buying goods on credit

Living on Credit • Although many Americans appeared to be prosperous during the ‘20’s many were living beyond their means as they were living on credit • Many bought goods & agreed to pay later • When the economy took the downturn many were unable to meet their obligations • Unable to meet the debt that they already had many Americans were forced to cut back on new purchases

Uneven Distribution of Income • During the 1920’s the wealthiest Americans wealth rose by 75% while the rest of Americas wealth rose by a mere 9% • More than 75% of Americas families earned les than $2,500 which was considered the minimum for a decent living • Approximately only 50% of American homes had electricity or heat • Most Americans did not have the means to participate in the economic boom of the ‘20’s & were left behind

Hoover Takes Over A Nation • The 1928 election would pit the Democratic candidate Alfred Smith versus the Republican candidate Herbert Hoover • Hoover had never run for public office while Smith was a career politician • Hoover would count on one major point, the prosperity of the ‘20’s under Republican guidance • In the end Hoover achieved an overwhelming victory

Dreams of Riches in the Stock Market • By 1929 economists had begun to warn of an impending disaster • Most Americans however were unphased by the warnings • The stock market had become the single most visible symbol of American prosperity • Throughout the ‘20’s the Dow Jones Industrial Average, the most widely used barometer, had steadily rose • This Bull Market, a period of rising stock prices, seamed to have an endless ceiling • Many Americans began to speculate or buy stocks at inflated prices with the hopes they would rise even higher • Many of the stock purchases were on the margin or buy now & pay later when the value had risen • This caused an increase in the value of the stocks but was not a true value of the companies • When the price of stocks began to fall many could not meet the margin call & would lose everything

The Stock Market Crashes • In early September 1929 stock prices peaked & the fell • Confidence in the market was shaken as investors began to panic selling their shares • On October 24 the market took another plunge & investors again began to unload their investments • The next day, known as Black Tuesday, investors attempted to get what they could for their stocks before prices fell any further • The market had crashed & millions of Americans had lost everything Crowd gathering on Wall Street after the 1929 crash.

Financial Collapse • The market crash would signal the beginning of the Great Depression • This would last from 1929-1940 • The crash did not cause the depression, but it did hastened it & make it more severe

Bank & Business Failures • After the crash many began withdrawing savings from the banks • The issue was that many could not get their money as the banks had invested in the stock market & did not have the cash, it was lost….. • As a result many banks were forced to close while those who had savings in those institutions were left with nothing • By 1933 11,000 of the nations 25,000 banks had closed • In the business world the GNP or Gross national Product, the nations total amount of goods & services, was cut in half resulting in layoffs for millions of Americans

Worldwide Shock Waves • The United States was not the only country gripped by the depression as it was also felt around the world • Many nations especially in Europe were still trying to recover from WWI • The depression made the problems worse as Americans could no longer afford to by imported goods & other nations could no longer afford to buy American products & farm goods • In 1930 Congress attempted to protect American goods by enacting the Hawley-Smoot Tariff which raised tariffs on all incoming goods • This would backfire as other nations enacted similar tariffs reducing the amount of goods that could be exported to those nations • Within a few short years trade had fallen 40%

Causes of the Great Depression • Many differ on the exact causes of the depression but they do share in a common set of factors • Policies that cut down the market for goods • Farm prices bottomed • Availability of easy credit • Unequal distribution of wealth

Causes of the Great Depression • As newly mechanized factories were cranking out goods at a record pace & demand was falling coupled with tariffs that would limit markets the American economy was doomed • Add failing banks, easy credit, & a sick stock market Americans would have to endure a period of despair the likes that have never been seen

The Great Depression Begins