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Chapter 22 Crash and Depression

Chapter 22 Crash and Depression

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Chapter 22 Crash and Depression

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  1. Chapter 22 Crash and Depression Photos by photographer Dorothea Lange

  2. Herbert Hoover • Herbert Hoover elected President in 1928: • “We are nearer to the final triumph over poverty than ever before in the history of any land” • Economy, business and gov. all seemed strong, no limits were placed on borrowing

  3. Causes of the Great Depression 1. Uneven Prosperity: • Huge corporations dominated industry: 200 companies owned 49% of industry • Majority of people (71%) earned less than $2500 a year, with no savings. Wealthy families (.1%) had over $100,000. 2. Credit: • Huge debt in America, over 60% borrowing

  4. 3. Too Many Goods/ Too Little Demand • Warehouses full, but no market • Farmers in trouble after WWI • Workers: most still overworked and under paid

  5. 4. Playing the Stock Market • Speculation: gambling on a long shot • Buying on Margin

  6. Stock/Stock Market • What is stock? • Who is a stockholder? • What does a stockbroker do? • How does the value of stock increase? • How does the value of stock decrease? • Who buys your stock from you?

  7. Why do people Buy Stock? • If a company does well, stock holders benefit • Investing/Dividend Checks • Can be a quick and easy way to make money • Gambling/ Buy Low, Sell High • Why do Companies Sell Stock? • To enable their company to expand • Quick and easy way to get money to • Hire more people • Increase # of stores • Improve technology

  8. Investing: • Stockholders are committing to the company for the “Long Haul” • Dividend checks each quarter if company makes profit • McDonald’s makes $10,000 in profits one quarter, you own 1% of the stock in that company, you make _______________. • Reinvest or keep? • Companies can count on your money • Gambling/ Playing the Stock Market: • No Commitment to the Company • “Buy Low, Sell High” • Health South stock crashes! • Still a good company • Could buy for 3 cents! • Buy 10, 000 shares, you pay _________ • Sell your stock at $6.00 a share, • you make _____________! • Companies cannot count on your money

  9. What is Buying on Margin? • What is a loan shark? • How can a loan shark affect the Stock Market?

  10. Major Issues today: • Home Mortgage • What is a Mortgage? • Buying a Home: • What is a Fixed Interest Rate? • What is an ARM (Adjustable Rate Mortgage)? • 30 year Mortgage: 8.0% • 7 Year ARM: 5.0 % • 5 Year ARM: 4.5% • 3 Year ARM: 4.0% • What are the advantages to A Fixed Rate? • What are the disadvantages to A Fixed Rate? • What are the advantages to an ARM? • What are the disadvantages to an ARM?

  11. TIMELINE • September 1929: Professional investors felt the market was in danger • No new customers were investing • Many began to sell off their stocks • October 24, 1929:Major Selling • A group of bankers pooled money and tried to slow the rush by investing • Stabilized a bit, but on Monday, falling again • October 29, 1929: BLACK TUESDAY • STOCK MARKET CRASHED

  12. Black Tuesday!! • The Stock Market Crash triggered the Great Depression • was not the cause! • 16.4 million shares sold • Over 30 billion in value lost • Initially only affected those who had invested in the market

  13. By mid-November, investors had lost about $30 billion

  14. Workers are affected • As income and profits fell, factories began to close • Workers lost jobs-most had no savings and now no income, more factories closed, more Americans out of work…began a downward cycle

  15. BANKS • People began to try to withdraw savings from banks, but found that their savings accounts had been vanished Bank run 1929, Los Angeles

  16. Banks • Banks had lent money to speculators • Banks had invested depositors’ money in the stock market hoping for higher profits • People rushed to get money, many banks closed • Over 5,500 banks closed • Over 9 million savings accounts vanished

  17. MISTAKES BY GOV. • Hawley-Smoot Tariff: intended to protect American Industry • Raised Tariffs by as much as 70% • Shut down international trade • Federal Reserve: had cut interest rates in 1920s to encourage spending • This encouraged Risky Spending

  18. DEPRESSION AFFECTS THE WORLD • US investments withdrawn from postwar Europe • Unemployment rose • Governments in danger of revolution

  19. Social Effects of the Depression • Hardest hit were those at the bottom of the economic ladder • Last to be hired and 1st to be fired • Hoovervilles and Hoover Blankets • Nicknames to mock the president

  20. HOBOS: • Homeless, unemployed Americans searching for work • Riding the rails • Mainly boys and young men

  21. THE DUST BOWL • Because of over cultivation of fields, Midwestern lands had no trees to protect land • 1932 drought, land dried up and had nothing to help hold the topsoil • Winds created dust storms

  22. Over 1,000,000 people left Midwest and moved to California

  23. Cities and Rural Areas • CITIES: people begged, went to soup kitchens, worked at any job they could find • RURAL AREAS: People grew food if possible, foraged in woods, tried to live off the land

  24. Stress on Families • Families had to live together in small apartments, 2-3 families per home • Divorce rates: • dropped b/c could not afford lawyers • Men felt like failures b/c they could not support family • Women often forced from jobs: more imp. For men to work

  25. Children in the Great Depression • Schools closed • Children lost education • Families couldn’t support their children • Sent to orphanages

  26. Discrimination in the Depression • Whites began to take minorities jobs • Many relief programs would not help minorities • Some whites declared that blacks should not have jobs if whites were out of work • Blacks were denied civil rights, education, voting, health care…

  27. Lynching increased • Hispanics and Asians were deported

  28. March 31, 1931: Scotsboro, AL • Scotsboro Boys: 9 black men accused of assaulting 2 white men and raping two white women

  29. No evidence • All 9 convicted and sentenced to death (youngest was 13) • Appeals lasted until 1950 • 1976 Governor Wallace pardoned the boys

  30. Pulling together • Majority of Americans pulled together to help out • Food Handouts • Work for room and board • Auctioneers left with no profits as neighbors kept bids low

  31. Escaping the Depression: Hollywood • 60-90 million Americans went to the movies to see beauty and glamour: to forget their troubles

  32. Escaping The Depression:Radio • Radio comedy sketches and soap operas also provided escapes:

  33. President Hoover Responds • Told people to have faith, that conditions would improve soon • Met with heads of banks, railroads, and other big business leaders • Convinced them to maintain wages and keep workers at jobs • By 1931, businesses could not do this; began to cut pay

  34. Hoover insisted that voluntary action was best • Felt that direct federal relief would destroy people’s self respect

  35. Did begin public works programs: public buildings, roads, parks, dams to create jobs • too little to impact the depression

  36. Only way to create enough jobs to make an impact was massive gov. spending • Hoover refused to do this • Had to have money for this to work • Where to get the money? • Raise taxes • Government deficit

  37. Reconstruction Finance Corporation • 1932: Hoover wanted banks to loan money to corporations to expand job hiring • Extend loans and credit to banks, railroads, and other large corp. • Ordinary people believed gov. was helping rich

  38. Emergency Relief and Construction Act • Hoover finally allowed massive Gov’t spending • 1.5 million was given for public works • 300 million to states • Not big enough a program to help • Economic collapse continued

  39. Americans Respond to the Depression • Hunger Marches • Against large corporations • Against the gov’t • “Feed the Hungry, Tax the Rich”

  40. Farmers Revolt • Began destroying crops to try to raise prices and blocked roads to prevent deliveries

  41. Bonus Army : Summer 1932 • 15,000 WWI Vets March on DC • Were promised bonuses after WWI • To be paid in 1945 • House: Yes • Senate : No • Most went home • Many stayed in abandoned buildings • Army was called in to remove them • ARMY VS. BONUS ARMY • Nation Horrified • Hoover accepts responsibility • Hurts him in 1932 election

  42. Election of 1932 • Hoover • Federal Gov’t should not step in and try to fix people’s problems • FDR • Large scale problems require the help of the gov’t • FDR won by over 7,000,000 votes • Many voted AGAINST Hoover

  43. “The only thing we have to Fear, is Fear Itself”

  44. Chapter 23: The New Deal • Willing to try anything to restore hope of Americans • FDR’s program of (attempted)economic recovery

  45. Sought advice from experts in business, agriculture, government, law, social work… • Deliberately chose people who had different viewpoints than him

  46. The First New Deal • The First One Hundred Days: • FDR sent one bill after another to Congress • Btwn March 9 and June 16, Congress passed 15 major acts for the New Deal