California Standard 3.12

The 1930sDepression - an economy with high unemployment, falling income, failing business, decline in production and sales.The Great DepressionMisconception: - Stock market crash was the cause of the Great Depression.

Farming Depression (1920-1935)Cheap land (Banks allowed buyers to put 25% down on an acre that cost $15.00)Over production on wheat (five million acres)The Dust Bowl

Heavy Real estate losses in Florida Mass Consumption:

Living above means

Uneven Distribution of WealthUninsured banksStock Market Crash

To attract investors brokers sold stocks on margin -- the investor paid only part of the selling price in cash and borrowed the rest on margin from the stock broker.Brokers borrowed money from the banks to cover the margin.

Complete the table below. Now, ask yourself why would a broker want to sell stock on

margin? Is this risky?

Stock

Investor’sinitial cost

Amount Broker Must Borrow

Investor 110

Shares$1

Investor 250

Shares$495.00

Investor 3100

Shares$10.00

Shares are being sold at $1.00 each. Initially, the investor owes 10%.

March 1928 – Stock prices soared and the number of shares traded rose sharplyStock prices were 400 percent higherInvestors became cautiousFewer buyers drove prices down

October 1929 “Black T uesday ”

Confidence in stock market failedInvestors began selling stocksMargin calls- Banks wanted their money from brokers, and brokers wanted their money from investors.

Extra! Extra! Readall about it! StockMarket Crashed!Sad days ahead!

The Dust Bowl itself was restricted to a 97-million-acre piece of high, level land in the southern portion of the Great Plains: Colorado, New Mexico, Nebraska, Kansas, Oklahoma, and Texas.

From 1932-1936 the annual rainfall didn’t exceed 12 inchesLow wheat prices and yields drove farmers from their landsDust clouds lifted and settled over millions of acresFarmers and farmhands moved into California as migrant workersSeventy severe dust storms recorded in 1933

Atlantic Monthly, 1930s“Dust in the beds and in the flour bin, on dishes and walls and windows, in hair, eyes, teeth, and throats…”People in Cimarron County remember hanging wet blankets across their windows and laying wet cloths over their faces when they went to sleep.

Ceilings collapsed under the weight of the accumulated dust mounds.

Migration - movement of people from place to place for permanent settlementDrought in the plains forced owners off farmsThe Grapes of Wrath depicts this lifestyle

Migrant farm workersHomeless/farmless due to drought and “Dust Bowl”Poor mid-western farmers despised and abused in California

Factories and Mills closed

Manufacturing cut in half

Unemployment rose from 3.2 % to 24.9%

Banks ran out of money

“The Banking Crisis” F.D.R.

Mortgages foreclosed

Homelessness; poverty

“Riches to Rags”ForSale

Living ConditionsMalnutritionDoubtMost severe for men, women’s jobs actually roseChildren more self-reliantWhites took-over jobs held by minorities

The Government Responds

Hoover: self-reliance, restore confidence, grew unpopular as conditions worsenedRoosevelt elected in 1932“The only thing we have to fear is fear itself”Fireside chats (Full Transcripts)New Deal

End of Depression1939 - unemployment still 15%Outbreak of WWII - expansion of national defense, stimulating jobs and growthFederal Government expanded its role in social and economic areas

“The Big Blow” of Miami 1921: newspaper ad inviting tourists and investors to Miami Beach read: "…practically no danger from summer storms." 1920: population of Miami grew to nearly 30,000 (a 440% increase over the previous decade)September 15, 1926: National Weather Bureau issued warnings of three large tropical storms building in the Caribbean. Miamians did not understand what those warnings meant.The "Big Blow" was the second hurricane to hit South Florida that season. The storm crashed into Miami Beach at about 2:00 a.m. on September 18. Florida author Marjory Stoneman Douglas wrote: "Miami Beach was isolated in a sea of raving white water.“Residents step into “the eye of the storm” unknowingly. The second half of storm brought winds at 128 MPH & rain drowned people who didn't reach shelter in time.Miami's hurricane was considered the country's greatest natural disaster since the San Francisco earthquake and fire of 1906. It ranks among the 12th strongest and 12th deadliest storms. Slide 3

“Fireside Chat”

ADDRESS OF THE PRESIDENT DELIVERED BY RADIO FROM THE WHITE HOUSE: March 12, 1933 “ I want to talk for a few minutes with the people of the United States about banking -- with the comparatively few who understand the mechanics of banking but more particularly with the overwhelming majority who use banks for the making of deposits and the drawing of checks…First of all let me state the simple fact that when you deposit money in a bank the bank does not put the money into a safe deposit vault. It invests your money in many different forms of credit-bonds, commercial paper, mortgages and many other kinds of loans. In other words, the bank puts your money to work to keep the wheels of industry and of agriculture turning around. A comparatively small part of the money you put into the bank is kept in currency -- an amount which in normal times is wholly sufficient to cover the cash needs of the average citizen. In other words the total amount of all the currency in the country is only a small fraction of the total deposits in all of the banks. What, then, happened during the last few days of February and the first few days of March? Because of undermined confidence on the part of the public, there was a general rush by a large portion of our population to turn bank deposits into currency or gold. -- A rush so great that the soundest banks could not get enough currency to meet the demand. The reason for this was that on the spur of the moment it was, of course, impossible to sell perfectly sound assets of a bank and convert them into cash except at panic prices far below their real value…”The Government Responds