Financial Collapse

22.1

Great Depression: 1929- 1940

• The “economy plummeted and unemployment skyrocketed:

In the US:• 1929: 600 banks closed• By 1933 11,000 of 25,000 banks had

failed (44%)• Millions of $$$ lost• GNP cut in half from 1929- 1932 (from

$104 bil. to $59 bil.)

Great Depression: 1929- 1940

In the US (con’t.):

• 90,000 businesses went bankrupt

• Unemployment: 3% in 1929 (1.6 mil. workers) to 25% in 1933 (13 mil. workers)

Great Depression: 1929- 1940

In the World

• European nations faced high debts from WWI

• Germany had to pay war reparations

• Foreign nations not interested/ able to buy US goods

• Hawley- Smoot TarriffInflation 1923-24: A German woman feeding a stove with currency notes, which burn longer than the amount of firewood they can buy.

Great Depression: 1929- 1940

Hawley- Smoot Tarrif (US):• Established to protect American farmers &

manufacturers from competition• Put high taxes on imported goods• Reduced flow of goods into the US• Made unemployment worse in industries that

could not export goods to Europe• Other countries raised their own tariffs• Contributed to world trade decrease of more

than 40%

• In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the… Anyone? Anyone?… the Great Depression, passed the… Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?… raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Does anyone know what Vice President Bush called this in 1980? Anyone? Something-d-o-o economics. “Voodoo” economics.

Listen for Hawley- Smoot Tariff!

Causes of the Great Depression

1. Tariffs and War Debta. No demand for US goods

2. Farm Issuesa. Overproduction, low prices

b. Prices fell by 40%, income went from $10 billion to $4 billion

c. Farms were foreclosed due to unpaid bills

3. Credita. Many misused credit

b. Too much "easy credit"

4. Unequal Income Distribution

a. Very rich vs. very poor

b. People bought less

c. Only half the homes had electricity

5. Stock Market Crash

a. Speculation = people bought stock not based on value of company but on the assumption that the value would increase

b. Stocks became overvalued

c. Black Tuesday, Oct. 29, 1929