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THE GREAT DEPRESSION
Industries in Trouble
Key basic industries barely made profits
Railroads, Textiles, and Steel
Mining and Lumbering needed for war
No longer neededPeople weren’t building houses
(Housing starts) effect other business
Farmers need a liftPrices for agriculture rose during WWI
Crop prices fell 40% after the war
Farmers boosted production
Over-saturated market = lower price
Started selling farms due to faulting loans
ConsumersConsumers have less money to spend
Rising prices, stagnant wages, unbalanced distribution of income
Living on Credit- “Buy now pay later”
Hard to pay back loan with interest
People stopped purchasing
Uneven distribution of income
Rich got richer/Poor got poorer1920-1929: Wealthiest 1%=75% of incomeAverage = one outfit a year boughtThe flood of goods from the factories remained unsold
Dreams of Riches (Stock Market)
Mid-Late 20’s = boom time for Stockholders (Bull Market)Value of New York stock exchange
1925= $27 billionSeptember of 1929 =$87 billionAverage stockholder tripled investment
Dreams of Riches…. Playing the Stock
Market
The thought was: Economy is strong!
Some economists warned about its weaknesses
Engagement of Speculation
Buying on Margin
If stocks decline-no way of paying back the loan
The Stock Market Crashes
Early September: Stock prices peaked and then started to fall quickly
Confidence started to waver
Some investors quickly sold stocks
By Oct 24: Panicked investors unloaded their stocks (Black Thursday)
Black Tuesday…Losing it all!
October 29th: Bottom fell out of the market and the Nations confidence fellStock holders frantically dumped shares before prices got lower
$16.4 million dumped
Early November: Investors lost $30 bil.
Financial Collapse
Stock market crash signaled the beginning of The Great Depression
Period from 1929-1940
Economy plummeted, unemployment skyrocketed
Crash alone didn’t cause The Great Depression
Bank Failures
Panicked people withdrew their money
Problem: Banks invested in the stock market
1929: 600 banks closed
By 1933: 11,000 of the 25,000 banks in America failed
Business Failures
The nations output of goods (GDP) cut in half between 1929-1932
90,000 businesses went bankrupt
Unemployment up from 3% in 1929 to 25% in 1933 (millions of jobs lost)
Workers faced pay cuts and reduction of hours
Depression Worldwide
Europe suffered through the 1920’s
Recovering from the war
Germany had to pay reparations
America: No longer afford foreign goods which hurt European markets
In turn: Difficult to sell farm products abroad
Hawley-Smoot Tariff ActProtect farmers and manufacturers from foreign competitionHad opposite effect (discouraged trade)World trade fell 40%
Causes of the Great Depression
Tariffs and War debt policies that cut down the market or American goodsA crisis in the farm sectorThe availability of easy creditAn unequal distribution of income
Hoover’s Philosophy
Government’s chief function: Conflict managers (not controllers)
“Rugged individualism” valued
Opposed any form of welfare or direct relief to the needy
Hoover's Cautious StepsAsked labor leaders not to demand higher wages or strikeHelped private charities generate contributions to the poor
Everything continued to get worse
Too little, too late...
Construction of a dam on the Colorado River
Approved $700 million public works program
Profit: Sell generated electricityProvided: Flood control
Critics of Hoover
“Farm Holiday”: Refusing to work fields
“Hoovervilles”: the name given to the shantytowns in the 30’s
“Hoover Blankets”: Newspapers
“Hoover Flags”: Empty inside out pockets
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