the great depression mr. stikes. ssush17 the student will analyze the causes and consequences of the...
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The Great Depression
Mr. Stikes
SSUSH17 The student will analyze the causes and consequences of the Great Depression.
a. Describe the causes, including overproduction, underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression.
b. Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west.
c. Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles.
Causes of the Great Depression
a. Describe the causes, including overproduction, underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression.
Terms to Understand
Long Term Causes of Great Depression Overproduction
Underconsumption
Speculation
excessive production, production in excess of need or stipulated amount. [Random House Dictionary, © Random House, Inc. 2012. ]
engagement in business transactions involving considerable risk but offering the chance of large gains, especially trading in commodities, stocks, etc., in the hope of profit from changes in the market price.[Random House Dictionary, © Random House, Inc. 2012. ]
Consumption of less than is produced; consumption of less than the usual amount.[Webster’s Revised Unabridged Dictionary, © C. & G. Merriam & Co. 1913. ]
Buying on margin
Dow Jones Industrial Average (DJIA)
Stock
Long Term Causes of Great Depression
Buying securities with the aid of borrowed money[http://campus.murraystate.edu/academic/faculty/lguin/Schematic/Margin.htm.]
Stock index of 30 of the top blue chip stocks on the New York Stock Exchange – basically, when it is up, prices are up & vice versa[http://www.personalfinance.duke.edu/glossary-term/dow-jones-industrial-average. ]
Ownership of a portion of a company that gives you: 1) a vote on company policy, including picking the board of directors and 2) a right to a percentage of company earnings[http://hspm.sph.sc.edu/courses/Econ/Classes/Stocksandflows/Stocksandflows.html. ]
A piece of stock is called a “share”
Causes of the Depression Federal Reserve
Founded in 1913 to help keep economy stable
System made up of 12 regional banks and a board of directors
Controls US monetary policyThe control of the supply and cost of
money Practically, the Fed:
Sets interest ratesSells government securitiesSet bank reserve levels
Outline of the Crash
Stock Market Crash of 1929 Black Thursday, October 24, 1929:
Many stocks sold; those who bought on margin are forced to sell to pay back loans Public confidence in markets shaken
Bankers agreement (led by J.P. Morgan and Co.) – buy stocks above market value Attempt to prop up market, restore
confidence
Friday-Saturday, October 25, 1929: Market holds steady
Stock Market Crash of 1929 Black Monday, October 28, 1929:
Average stock price (DJIA) dropped 13% 2nd worst day in the history of the market
Black Tuesday, October 29, 1929: Rush to sell at opening bell 16,410,030 shares traded Average stock price (DJIA) dropped
another 12% 3rd worst day in the history of the market
Long Term CausesExplanations
Causes of the Depression “Prosperity Decade” of the 1920’s
High employment Low inflation 30% rise in industrial production US produced ½ of world’s industrial
output Per capita income:
1919 – $5201929 – $681
Causes of the Depression “False Positives”
Widespread poverty60% of nation lived on less than $2,000
annually40% of nation lived on less than $1,500
annually Wealth disparity
Richest 1% of Americans earned 19% of all profits in 1929, versus 12% in 1919
Causes of the Depression “False Positives”
Lower wages in key industries like mining, manufacturing, transportationEx. coal miner’s avg. hrly. wage: $0.845
in 1923 vs. $0.625 in 1929 93% of non-farm population saw
disposable income fall during 1920’s 5,000 of nation’s 30,000 banks failed
between 1920 and 1929
Causes of the Depression “False Positives”
Depression of farm pricesRevival of European agriculture after
WWI Introduction of Australian and
Argentinean products to world markets Long term debt for farmers High taxes for farmers
Life During the DepressionGovernment Action,
1929-1932
Causes of the Depression Federal Reserve during the
Depression Slowed growth of monetary supply
leading up to stock market crash “Liquidity crisis”
No cash to spend for local banks or businesses
Causes of the Depression Tariffs
Fordney-McCumber Tariff of 1922 Return to isolationism Raised tariffs to an average of 38.5% on
imported goods
Hawley-Smoot Tariff of 1930 Goal: raise tariffs on agricultural products, increase
domestic prices/production Actual result: decrease in exports, perhaps
retaliationDID YOU KNOW: Economic historians debate whether or not Hawley-Smoot made the Great Depression worse. Traditionally, historians have argued this protectionism further damaged the American economy. Newer studies, however, show the tariff being responsible for about 21% of the decline in GDP.
Tariffs Rates under Fordney-McCumber vs. Smoot-Hawley (equivalent ad valorem rates)
Product Fordney-McCumber Smoot-Hawley
Chemicals 29.72% 36.09%
Earthenware, and Glass 48.71 53.73
Metals 33.95 35.08
Wood 24.78 11.73
Sugar 67.85 77.21
Tobacco 63.09 64.78
Agricultural Products 22.71 35.07
Spirits and Wines 38.83 47.44
Cotton Manufactures 40.27 46.42
Flax, Hemp, and Jute 18.16 19.14
Wool and Manufactures 49.54 59.83
Silk Manufactures 56.56 59.13
Rayon Manufactures 52.33 53.62
Paper and Books 24.74 26.06
Sundries 36.97 28.45
TOTAL: 38.48 41.14Source: U.S. Tariff Commission, The Tariff
Review, July 1930, Table II, p. 196.
The Dust Bowl
b. Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west.
Farm Problems Overfarming
Need to produce more to make same amount of money
Leads to poor soil quality, etc.
Debt Needed to borrow to produce more High interest rates and low prices led to
more debt
Farm Problems Natural Phenomenon
Boll Weevil In Georgia by 1915 Forced farmers to
abandon fields Many farms fore closed Sharecropping increased
Drought Georgia’s worst drought in history: 1930-
1931
Typical Georgia farm family during the Depression:
No electricity No running water No indoor bathroom Inadequate diet (mainly of molasses, fatback &
cornbread) No education system to speak of Few rural clinics, hospitals, or health care
workers Much sicknesses (tuberculosis and malaria
were common)Conditions were described as "depleted soil, shoddy livestock, inadequate farm equipment, crude agricultural practices, crippled institutions, a defeated and impoverished people." Arthur F. Raper, Preface to Peasantry: A Tale of Two Black Belt Counties (1936)
Farm Problems Natural Phenomenon
Dust Bowl Period of environmental disaster during the
1930’s in the Great Plains Caused huge dust storms of top soil to
blow throughout the country Causes of the Dust Bowl
Overfarming / OvergrazingSod on the Great Plains was thin, leaving it
vulnerable to being overfarmed and overgrazed
Drought
"Fleeing a dust storm”
Farmer Arthur Coble and sons walking in the face of a dust storm, Cimmaron County, Oklahoma. Arthur Rothstein, photographer, April, 1936.
From the Library of Congress.
“Black Blizzard”
A black blizzard over Prowers Co., Colorado, 1937.
From Western History Collection, University of Oklahoma.
“Black Blizzard”
A black blizzard over Prowers Co., Colorado, 1937.
From Western History Collection, University of Oklahoma.
“A dust cloud approaches a small town in Oklahoma.”
http://www.weru.ksu.edu/new_weru/multimedia/dustbowl/big/weokla.jpg
Dust storm approaching Stratford, Texas Dust bowl surveying in Texas
Image ID: theb1366, Historic C&GS Collection Location: Stratford, Texas Photo Date: April 18, 1935 Credit: NOAA George E. Marsh Album
Results of the Dust Bowl Environmental Disaster
Lost between 2.5 and 5 inches of topsoil over almost 25 million acres of land in the Great Plains
Movement west Over 1,000,000 migrant farm workers
moved west by 1939
Social and Political Impact of the Great Depression
c. Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles.
Daily Life in the Depression Unemployment / Loss of income
> 3 million in 1929 4 million in 1930, 8 million in 1931, 12 1/2 million in 1932
About ¼ of American families did not have one wage earner
¾ of American workers were part-time
“Hoovervilles” Towns of shacks and shantys set up by people
out of work
Bread Lines
Dow Jones Industrial Average,1920-1939