The Great Depression American Gothic by Grant Wood, 1930
Basic Economic Principles Adam Smith, Dead Scottish Economist
Supply 1 • The amount of a product or service that is available for consumers. • High supply results in falling prices. • Low supply results in rising prices. • Too much of something results in worthlessness.
Demand 2 • The desire or need consumers have for a product or service • High demand results in rising prices. • Low demand results in lower prices.
The Relationship 3 • Supply and demand are related. • If supply increases, demand decreases. • If supply decreases, demand increases.
Business Cycle 4 • The economy moves in cycles. • Boom - It expands when business grows and money is easily available. • Bust - It contracts when business declines, people lose jobs, and money is harder to earn.
A slow economic period characterized by high unemployment, homelessness, business failure, and poverty Depression 5
6 Dow Jones Industrial Average • An average of the prices of stocks of major industries available on the market • It indicates the health of the economy • From Jan 1928 to Sept 1929 – the Dow had climbed from 191 to 381
The Economy Falters . . .
Or . . . how the bottom fell out
7 Contributing Factors • Agricultural overproduction • Industrial overproduction • High tariffs • War debts • Unequal distribution of wealth • Over speculation in the stock market • Financial panic
Farmers’ Troubles 8 During World War I • Europeans were desperate for food shipments from the U.S. (Demandincreased) • The U.S. govt. passed price supports, promising farmers high prices for produce. • Farmers began overproducing. Continued
Farmers’ Troubles 8 At the end of World War I • U.S. govt. removed price supports. • Europeans grew more self-sufficient. • Demand for our farm products fell. • Farm prices fell drastically. • Also farmers were in debt for new technology, such as tractors.
Farmer Boy, Am I in debt! Tractor
Decline in Overseas Trade 9 • Exports dropped 50% during the 1920s because of less demand after WWI • We raised tariffs, so nations in Europe raised theirs – a “tariff war”
Unpaid War Debts 10 European nations refused to pay their WWI debts, claiming they had already paid “in blood”
Economic Disparity(unequal distribution of wealth) 11 • Disparity – unfairness, inequality • The rich grew richer, while the poor grew poorer. • Few “middle class”
Overuse of Credit 12 • Most Americans were in debt for the first time in U.S. history, especially farmers.
Stock Market Dangers 13 • Over speculation • Buying stocks on margin
Buying Stocks “on the Margin” • You pay only a fraction of the price of the stock. If the stock increases in value, you keep the profit. If the stock decreases in value, you have to pay the broker, or sell the stock at a loss. Very risky, especially since there were no regulations on this practice.
Black Thursday 14 • Thursday, October 24, 1929 • Dow Jones Average had fallen 21 points the closing hour the day before. • Investors began to sell their shares of stock before the prices fell more.
Black Tuesday 15 • Tuesday, October 29, 1929 • Investors started to panic • 16.4 million shares were sold on the stock market.
The “Great Crash” 16 • Stock prices continued to fall. • Investors continued to sell their shares of stock at a loss. • By November, the Dow had fallen to 198.7 (down from 381 in Sept.) • Total stock market losses were $30 billion.
Record High 381 The Crash Record Low 199
Ripple Effects of the Crash
Life During the Great Depression
Hoovervilles 20 • Nickname for the shanty towns built by the homeless during the Depression. • Shows the blame the people placed on President Hoover for not fixing the crisis.
The Dustbowl 21 • Over-farming and drought in the Great Plains (Ok, Texas, Kansas) • The topsoil began to blow away. • Dust storms dropped tons of soil hundreds of miles away. • Lasted 7 years (1931 – 1938). • 60% of dustbowl families lost their farms – Many moved to California.
John Steinbeck 22 • Wrote The Grapes of Wrath. • Describes the lives of farmers and workers who lost everything during the Depression. • Brings national attention to the problems facing the less fortunate.
Dorthea Lange 23 • Photographed hundreds of migrantworkers coming to California from the Great Plains and sharecroppers in the South. • Portrayed the desperation of families.