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