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THE GREAT DEPRESSION

THE GREAT DEPRESSION. 1929-1941 A DIFFICULT LEARNING EXPERIENCE FOR THE U.S.!!. WHATDUNIT? The Great Depression Mystery. The American economy went from unprecedented prosperity in the 1920s to unprecedented misery in the 1930s. WHY ?.

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THE GREAT DEPRESSION

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  1. THE GREAT DEPRESSION 1929-1941 A DIFFICULT LEARNING EXPERIENCE FOR THE U.S.!!

  2. WHATDUNIT? The Great Depression Mystery The American economy went from unprecedented prosperity in the 1920s to unprecedented misery in the 1930s. WHY?

  3. THE BUSINESS CYCLE: The UP’s & DOWN’s of the Economy

  4. THE BUSINESS CYCLE • BOOM—PROSPERITY—PEAK • HIGH DEMAND= • DESIRE FOR MORE PROFITS = • GREATER INVESTMENT = • MORE PRODUCTION = • HIGHER EMPLOYMENT = • MORE DEMAND = • HIGHER PRICES (INFLATION)

  5. THE BUSINESS CYLCLE • CONTRACTION—SLOWDOWN • INFLATION/OVERPRODUCTION • LESS PRODUCTION = • LAY OFFS = • LESS SPENDING = • LOWER CONFIDENCE = • LESS INVESTMENT = • HIGHER UNEMPLOYMENT • UNTIL SURPLUSES ARE USED UP

  6. THE BUSINESS CYCLE • EXPANSION/RECOVERY • HIGHER DEMAND • SURPLUS REDUCTION = • MORE PRODUCTION = • RECALL OF WORKERS = • MORE PURCHASING= • INCREASED INVESTMENTS = • ECONOMIC GROWTH

  7. BUSINESS CYCLE TROUGHS • RECESSION • 2 successive quarters (3 months) of declining GDP ($ of govt, consumer, and business spending) • DEPRESSION • Unemployment greater than 12%

  8. Laissez Faire Economic Policy • Prior to the Great Depression the US. Government ignored the business cycles of the US economy. • The Government until FDR believed that the American Economy could fix itself. Laissez-Faire… “Hands Off” The Great Depression is a turning Point in US History!

  9. Government Today is in charge of the US Economy! • Presidents win or lose elections based on economic performance! • Government control over one third of our $10 trillion economy!!

  10. CAUSES OF THE GREAT DEPRESSION • Agricultural Overproduction • Poor environmental policies & practice • Industrial Overproduction • Uneven distribution of wealth • Over speculation + Margin Buying • Easy Money (Credit) • High Tariffs

  11. AGRICULTURAL OVERPRODUCTION • Increased Technology • Good Growing Conditions • Supply Greater than Demand

  12. INDUSTRIAL OVERPRODUCTION • Wages not keep up with inflation • Supply Greater than Demand • Profits up 63%... Wages only up 11%

  13. UNEVEN DISTIBUTION OF WEALTH • Many Poor and Very Few Rich!

  14. UNEVEN DISTIBUTION OF WEALTH Workers earn so little they can’t buy the products they produce! Wages were as little as 20 – 25 cents per hour! Even the best employer Ford Motor Company paid only $5.00/Day for a 6AM-6PM shift!

  15. Hamburger 20-30 cents a pound Butter 28 cents a pound Potatoes 2 cents a pound Bedroom set $50 Blanket $1 Gas 20 cents/gallon Vacuum cleaner $18 Women’s Coat $6 Shoes $2 Men’s Suit $11 Baseball Glove $1.19 BB Gun $2 Chrysler 4 door $1000 Chevy 2 Door $540 6 Room House $3000 Prices in the 1920’s & 1930’s Great Prices But?

  16. Bus driver: no power steering or brakes $1300 or $0.43/hr Teacher $1227 Waitress $520 or $0.20/hr Farmhand $216 or $0.07/hr First minimum wage under FDR $0.25/hr Highest paid production workers in the 1920’s – Ford Motor Company $5.00/day or $0.48/hr. Farm Prices: Potatoes, Cotton, Pork $0.01/pound potatoes $0.05/pound cotton $0.05/pound pork Salaries 1920’s and 1930’s

  17. OVERSPECULATION • “GET RICH QUICK SYNDROME” • Margin Buying • Lack of Government Regulation • Panic Selling • 1929 Market Crash

  18. The Great Crash 1929! • Stock prices peak in September & slowly decline • Wed. Oct. 23 Dow drop 21 points in an hour • Oct. 24—Investor begin to sell stocks & prices fall • Bankers pool $ to buy stock = temporarily stabilize prices • Mon. Oct. 28—prices continue to fall • Tuesday, Oct. 29—16.4 million shares sold • Average 4-8 million shares sold previous day

  19. Effects of the Great Crash • Investors lose millions • Businesses lose profits • Consumer spending drops • Businesses cut investments & production • Workers are laid off • Business cannot repay bank loans • Banks run out of money • Bank runs occur • Savings accounts are wiped out

  20. EASY MONEY (CREDIT) • Interest rates on loans were too low = too much borrowing • Interest rates on savings were too low = too much spending (Inflation) • Excessive real estate construction = Oversupply GHS Rules

  21. POOR MONETARY POLICY • Shouldn’t Have: • Fed. Reserve INCREASED interest rates • Money/Borrowing MORE EXPENSIVE & Saving MORE ATTRACTIVE • Should Have: • LOWERED interest rates to give the economy a“JUMP START”

  22. POOR FISCAL POLICY • Shouldn’t Have: • Hoover Admin. & Congress CUT SPENDING & RAISED TAXES to balance the budget • Should Have: • INCREASE SPENDING & CUT TAXES to “JUMP START” the economy • EX: Temporary Deficit Spending

  23. HIGH TARIFFS • Foreign imports taxed to protect US products • Hawley-Smoot Tariff • Highest protective Tariff in US History • Foreign nations taxed imports from the U.S. in retaliation • Higher priced fed under consumption • Nations stopped paying WWI debts to the US

  24. Unlock the Mystery of the Great Depression What contributed to the financial catastrophe known as the “Great Depression”?

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