Unit 11: Great Depression & WWII

1. Unit 11:Great Depression & WWII Time Period: 1929-1945

2. Unit Questions • What caused the Great Depression? • How did people experience the Great Depression? • Who was FDR and what was the New Deal? • What caused WWII? • Should the USA get involved in WWII? • How do the two theaters of WWII compare? • Should the USA drop the atomic bomb? • What were the effects of WWII?

3. Unit Question of the Day • What caused the Great Depression?

4. The Great Depression was a worldwide event. By 1929, the world suffered a major rise in unemployment.

5. The Great Depression was not the country’s first depression, though it proved to be the longest and most severe.

6. In the first four years of the Depression, The U.S. Stock Market lost 90% of its value.

7. There are several explanations, but the most obvious causes are four:1. Overproduction2. Banking & Money Policies 3. Stock Market Actions 4. Political decisions

8. There are several explanations, but the most obvious causes are four:1. Overproduction2. Banking & Money Policies 3. Stock Market Actions 4. Political decisions

9. 1. Over-production:

10. The “roaring twenties” was an era when our country prospered tremendously. Average output per worker increased 32% in manufacturing and corporate profits rose 62%.

11. But in reality there existed:*Underconsumption of these goods here and abroad, because people didn’t have enough cash to buy all they wanted…* There still existed an uneven distribution of wealth and income.

12. Americas’ farms were overproducing, as well.During World War I, with European farms in ruin, the American farm was a prosperous business.

13. Increased food production during World War I was an economic “boom” for many farmers, who borrowed money to enlarge and modernize their farms.

14. So, to summarize it, HIGH DEMANDfor consumer goods and agricultural products led to OVERPRODUCTION.

15. 2. Banking & Money Policies

16. The uneven distribution of wealth didn’t stop the poor and middle class from wantingto possess luxury items, such as cars and radios…

17. Although wages were not keeping up with the prices of those goods…”buying on credit” offer a solutions!

18. By the end of the 1920s, 60% of the cars and 80% of the radios were bought on installment credit.

19. The Federal Reserve Boardwas created by Congress in response to the Banking Crisis of 1907.

20. The Federal Reserve was suppose to serve as a protective “watchdog”of the nation’s economy. It had the power to set the interest rate for loans issued by banks.

21. So,to summarize, banking policies which offered “buying on credit”first with lower interest rates, then raising those rates, caused a dangerous situation in the economy.

22. Buying on Credit increased personal debt.Higher interest rates caused LESS DEMANDfor goods.

23. 3. STOCK MARKET ACTIONS

24. The Stock Market was an indicator of national prosperity.

25. The Stock Market growth in the 1920s tells a story of runaway optimism for the future.

26. As business was booming in the 1920s and stock prices kept risingwith businesses’ growing profits, buying stocks on marginfunctioned like buying a car on credit.

27. So what went wrong?

28. The Crash: “Black Tuesday” Oct. 29, 1929, the Stock Market crashed.

29. Over 16 million shares sold in massive selling frenzy.Losses exceeded $26 billion.

30. The Stock Market Crash of 1929was only a symptom- not the cause of the Great Depression.

31. Buying on Marginwas a risky market practice.Bank loans for stock purchases was an unsound practice.

32. More Poor Banking Policies…

33. As banks closed their doors and more people lost their savings, fear gripped depositors across the nation.

34. Business also lost its money and could not finance its activities…More businesses went bankrupt and closed their doors, leaving more people unemployed…

35. …Causing unemployment to reach even higher levels.

37. 4. Political Decisions:

38. The Depression could have been less severe had policy makers not made certain mistakes…

39. Leaders in government and business relied on poor advice from economic & political experts...

40. But did Hoover really believe in a “hands-off” free market philosophy?

41. Hoover did take action to intervene in the economy, but it was too little too late-

42. Within a month of the crash, Hoover met with key business leaders to urge them to keep wages high, even though prices and profits were falling.

43. The greatest mistake of the Hoover administration was passage of the Smoot-Hawley Tariff, passed in 1930. (It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture into a tailspin.)

44. Officials believed that raising trade barriers would force Americans to buy more goods at home, which would keep Americans employed.

46. It virtually closed our borders to foreign goods and ignited a vicious international trade war.

47. Europe had debts from World War I and Germany had reparations to pay. Foreign nations were forced to curtail their purchase of Americans goods.

48. In summary, The Smoot-Hawley Tariff created trade wars and worsened world economic conditions. Huge increase in taxes hurt companies and individuals.

49. 1. Overproduction(responding to high demand for goods)2. Banking & Money Policies(low interest rates, buying on credit, raise in interest rates, low reserve rates for banks.)3. Stock Market Practices(buying on margin, bank loans for stock purchases)4. Political decisions (Smoot-Hawley Tariff, Increase Income Tax)

50. Exit Ticket • Look at your notes about the Causes of the Great Depression.Which cause might have had the biggest impact on the USA? Explain your reasoning.