the great depression. business cycle economic prosperity falling prices economic depresstion rising...

The Great Depression

Business Cycle

Economic Prosperity

Falling Prices

Economic Depresstion

Rising Prices

Bull Market

Bear Market

Bear Market: A general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism.

Bull Market: An increasing investor confidence, and increased investing in anticipation of future price increases

Causes of the Depression

• High Tariffs• Availability of Easy Credit• Over Production• Unequal Distribution of Income• Over speculation• Crisis in the farm sector

High Tariffs

• Helped stifle world trade and hurt American businesses

• Prevented other countries from selling their goods in the US

• It prevented them securing the dollars that they needed to buy American products.

Availability of Easy Credit

• In the 1920s people bought luxury items on credit paid for through installment plans allowing people to live beyond their means.

• Business was expanding and the federal government failed to control bank loans

• People were buying stock that had no value

Over Production

• More goods were being produced than were selling (called stockpiling)

• Wages were rising more slowly than production and prices of goods.

• Credit concealed the fact that there was a decline in purchases.

Unequal Distribution of Income

• If farmers had received better prices and workers had received higher wages the American people would have been able to purchase the surplus

Over speculation

• Stocks were no longer being bought and sold on the bases of their current value

• They were being bought on the assumption that they would go UP & UP!

• Buying on the Margin: Borrowing money to help pay for the stock

• So if a stock declined people who had “bought on the margin” had no way to pay off the loan

Crisis in the Farm Sector

• Farms were auctioned off when farmers could not pay their mortgages.

• Thousands of farmers lost their land

• However on plus on farms was farmers could grow food for their families unlike the cities

Bank and Business Failure

• Not long after the stock market crashed millions of Americans who had never owned stocks were affected.

• Many people panicked and rushed the bank trying to

• Many banks began to close because they could not return depositors’ money

Black Tuesday

• On October 29th 1929• The Bottom fell out of

the market.• Investors raced to sell

their stocks

• This signals the beginning of the GREAT DEPRESSION

Hawley-Smoot Tariff

• Designed to protect American farmers but had the OPPOSITE effect

• The tariff prevented other countries from earning American currency to buy American goods.

• Farmers could no longer export goods to Europe thereby making unemployment worse.

Worldwide Shock Waves

• As a result of the collapse of the American economic system it led to a worldwide depression.

• International trade slowed down as a result of the high protective tariffs – EX: The Smoot-Hawley

Tariff

The Dust Bowl• Plowing had removed the thick protective layer of

prairie grasses. • Farmers exhausted the land through

overproduction of crops.

Areas that became known as the DUST BOWLKansas, Oklahoma, Texas, New Mexico, Colorado

Every day men would set out from home and walk the streets in search of jobs. Some became so discouraged they simply stopped trying, some even abandoned their

families.

• During the Great Depression there was a drastic rise in the homeless: men who were laid off and lost their homes.

– Many became hobos: Men & Boys who rode the rails as they searched for work

Mental and Physical Results

• Many people were physically and mentally impacted.– Their health declined as a result of poor diet and

anxiety• People were demoralized and lost their will to

survive• The Suicide rate rose more than 30• 3 times as many people were admitted to

state mental hospitals