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THE STOCK MARKET CRASH & THE GREAT DEPRESSION

THE STOCK MARKET CRASH & THE GREAT DEPRESSION . CONSUMER ECONOMY BOOM. Consumers began to buy everything on credit Installment plans were the new fad By 1929, 60% of all cars and 80% of all appliances were bought on credit Advertising brought in $1.5 billion in 1927

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THE STOCK MARKET CRASH & THE GREAT DEPRESSION

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  1. THE STOCK MARKET CRASH & THE GREAT DEPRESSION

  2. CONSUMER ECONOMY BOOM • Consumers began to buy everything on credit • Installment plans were the new fad • By 1929, 60% of all cars and 80% of all appliances were bought on credit • Advertising brought in $1.5 billion in 1927 • First Fast Food Chain emerged, A&W • The number of millionaires doubled during the 20s

  3. COOLIDGE PROSPERITY • Calvin Coolidge had won the presidency in 1924 • He declared America’s economy was based on “laissez-faire”, which meant “the business of America is business” • Huge profits of the 1920s were being made through three groups: Wall Street, Land Speculators, & Bootleggers

  4. THREE CAUSE OF THE STOCK MARKET CRASH • Speculation • Making high-risk investments in hopes of a high gain • Buying on Margin • Allowed investors to buy stocks for only a fraction of its price and borrow the rest of the money • Investors would put 10% down on the stock and borrow the rest • Overproduction of Goods • Industrial growth and buying on credit caused for an increase in supply and demand

  5. A NEW LOOK • In 1928, Herbert Hoover won the presidential race as Coolidge decided to not run • Slogan, “We in America are nearer to the final triumph over poverty than ever before in the history of any land • He was brought into a pressure cooker job; he had to continue American prosperity

  6. THE PROGNOSTICATION • A crash was looming, but no one listened • In August 1929, Roger Babson advised wise investors to pay up their loans and quit buying on margin because the market was going to crash • On October 24, 1929, a large number of investors suddenly began to sell their shares • This led to prices plunging

  7. THE CRASH • Known as “Black Tuesday”, worried investors quickly sold 16 million shares of stock on October 29, 1929 • This led to the crash of the stock market • Unable to raise the funds, thousands of people were forced to sell their stock at huge losses • Stockholders, in the end, lost over $30 billion

  8. BANKING PROBLEMS • “Black Tuesday” also caused banks to fail was well • No money paid back on loans = No banks • Many people tried to pull all their life savings out of the banks, which also caused some to fail • Also, many people were not able to even receive money they had stored in the banks

  9. DEPRESSION • The Gross Domestic Product, GDP, is defined as the total value of all goods and services produced during a given year • Staggering statistics: • GDP fell 29% • Consumer buying dropped 18% • Construction dropped 77% • Investment dropped 98% • Unemployment rate rose to 25%

  10. LAY THE BLAME • Hoover took the brunt of the blame for the crash • People began to mock Hoover: • Hoovervilles --- shantytowns the homeless lived • Hoover Flags --- empty pockets turned inside out • Hoover Blankets --- Newspapers used as covers

  11. HOOVER’S PROBLEMS • Salvation Army • Set up to aide people in NOT going hungry • Revenue Act of 1932 • Raised top taxes from 25% to 63%; taxed was passed on to the consumers

  12. FDR • Franklin Delano Roosevelt was elected president in 1932 • Roosevelt’s plan for action was known as “The New Deal” • The Three R’s of Roosevelt’s plan was Reform, Recovery, and Relief • FDR won the popular vote 28 million votes to 15 million votes • Won the Electoral College 472 to 50 • During his inauguration speech, he stated, “The only thing we have to fear is fear itself”

  13. WHO WAS THIS MAN? • FDR was the cousin of former president Teddy Roosevelt • Married to Eleanor Roosevelt who played a vital role in his presidency • Stricken with polio in 1921 and did not have usage of his legs • Roosevelt conducted “fireside chats” to connect with the American people on a personal basis • These were broadcasted over the radio

  14. ROOSEVELT’S PRESIDENCY • On the day FDR took his oath of office, there were about 15 million people standing in bread lines and in soup kitchens • FDR assembled a “Brain Trust” to help make a change in society • FDR coined his recovery acts of legislation the NEW DEAL

  15. THE FIRST NEW DEAL • Civilian Conservation Corps • Federal Emergency Relief Act • Tennessee Valley Authority • National Industrial Recovery Act • Civil Works Administration • Public Works Administration • Banking Acts • Federal Deposit Insurance Corporation • Securities and Exchange Commission

  16. THE SECOND NEW DEAL • Works Progress Administration • Social Security Act • Rural Electrification Administration • National Labor Relations Act • National Youth Administration • United States Housing Authority • United Auto Workers

  17. KEYNESIAN THEORY • Roosevelt drew much of his inspiration for the New Deal from the writings of British economist John Maynard Keynes • He believed that a government’s deficit spending could prime the economic pump and jump-start the economy

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