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The Great Depression
1929-1941
1st CAUSE OF THE 1st CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
1st CAUSE OF THE 1st CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
•An old decaying industrial base•Outmoded equipment made some industries less competitive
Industry in TroubleIndustry in TroubleIndustry in TroubleIndustry in Trouble•Textiles•Steel•Railroads•Mining and Lumbering•Automobiles•Construction
The miner says,
“Uh Oh…”
2nd CAUSE OF THE 2nd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION2nd CAUSE OF THE 2nd CAUSE OF THE
GREAT DEPRESSIONGREAT DEPRESSION•A crisis in the farm sector
•Farmers produced more than they were able to sell, especially with the demand of WWI and the disappearance of markets that the war had opened to them
Farmers in TroubleFarmers in TroubleFarmers in TroubleFarmers in Trouble•During WWI
•International demand for food crops soared•Prices Rose
•Farmers took out loans to buy more land and equipment
Farmers in TroubleFarmers in TroubleFarmers in TroubleFarmers in Trouble•Post WWI
•Prices and demand fell•To compensate for lower prices farmers boosted production
•Too much infiltrated the market
•PRICES FELL $
McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill
1. The government would buy from farmers surplus crops at guaranteed prices that were higher than the market rate
2. The government would then sell these crops on the world market for the lower prevailing prices
McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill
3. To make up for losses caused by buying high and selling low, the government would place a tax on domestic food sales, thus passing the cost of the farm program along to consumers
McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill
McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill•Congress passed 2x•Coolidge vetoed the bill 2x
•“Farmers have never made money. I don’t believe we can do much about it.”
3rd CAUSE OF THE 3rd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
3rd CAUSE OF THE 3rd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
•The availability of easy credit•Many people went into debt buying goods on the installment plan
Living on CreditLiving on Credit•Americans buying beyond their means
•Purchased goods on CREDITCREDIT•An arrangement in which consumers agreed to buy now and pay later for purchases
•Credit easily available•BUT Hard to pay off debts
4th CAUSE OF THE 4th CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
4th CAUSE OF THE 4th CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION
•An unequal distribution of income
•There was too little money in the hands of working people who were the vast majority of consumers
Less Money to SpendLess Money to Spend•Everyone’s income fell
•Americans buying less•Rising Prices•Stagnant Wages
UNBALANCED DISTRIBUTION OF INCOME
UNBALANCED DISTRIBUTION UNBALANCED DISTRIBUTION OF INCOMEOF INCOME
•½ the nation’s families earned less than $1500/year•1920-1929
•Income of the wealthiest 1% rose 75%•Poorest 40% of the population earned just over 1/10 of the national income
Speculation:The engagement in risky business transactions (buying or selling stocks) on the chance of quick or considerable profit
And the Stock Market Came Tumbling Down
Buying on Margin:Paying a small percentage of a stock’s price as a down payment and borrowing the rest
And the Stock Market Came Tumbling Down
October 24, 1929
Stock market took a bad fallPanicked investors unloaded their
shares
Going, going…gone…Going, going…gone…
October 29, 1929People and corporations frantically
tried to sell their stocks before prices plunged even lower
Those who had purchased stocks on credit acquired huge debts when
stock prices plunged
BLACK TUESDAYOctober 29, 1929
Many who had invested entire savings in the market lost
everything
16 million shares dumped
This is a scene of the Toronto Stock Exchange the day of the crash. Immediately after this picture was taken, the income of almost every single Canadian family was cut by more than half. The disappearance of national
resources meant a total economy collapse. The fisherman stopped going out to sea, workers connected
with the fish market were laid off or had fewer working hours for less money.
Dow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial Average
•Barometer of the Stock Market’s health
•Measure based on stock prices of 30 representative large trading firms trading on the NYSE
Alcoa 3M Altria (Philip Morris) American Express Boeing Caterpillar Citi Group Coca Cola E.I. DuPont de
Nemours Exxon Mobil General Electric General Motors Hewlett-Packard Home
Depot Honeywell Intel International Business Machines JP Morgan Chase
Johnson & Johnson McDonalds Merck Microsoft Proctor and Gamble SBC
Communications United Technologies Wal-Mart Stores Walt Disney
Financial CollapseFinancial CollapseFinancial CollapseFinancial Collapse•Many Americans panicked (wouldn’t you?!!) and tried to withdraw all of their money from banks•Banks forced to close because they could not cover their customers’ withdrawals
•Banks lost money in the crash, too
Financial CollapseFinancial CollapseFinancial CollapseFinancial Collapse•Economy went into a tailspin•Unemployment rose dramatically
•1929•3% of workforce unemployed
•1933•25% of workforce unemployed
Some Folks Did Ok…Some Folks Did Ok…Some Folks Did Ok…Some Folks Did Ok…•Joe Kennedy made all of his money during the weeks just before the Crash•Some held onto their jobs
•Endured pay cuts•Endured fewer work hours
$$$$$$$$$$$$$$$$$$$$$$$$
Shockwaves Throughout Shockwaves Throughout the Worldthe World
Shockwaves Throughout Shockwaves Throughout the Worldthe World
•Europe still recovering from WWI•USA limited Europeans from exporting their goods
•THEREFORE, IT BECAME MORE DIFFICULT TO SELL US GOODS ABROAD
Hawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffThe most ridiculous sounding name for a tariff ever
•Highest protective tariff in history•Designed to help US farmers and manufacturers by protecting their products from foreign competition
Hawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffBACKFIRED:•Reduced number of European goods into USA•Prevented other countries from earning US currency to purchase American exports•Countries reacted by raising their own tariffs•Reduced overall economic activity
Gold Standard•Britain and other European countries went off the Gold standard
•Paper money could no longer be exchanged for gold
•Gold dropped in value•Europeans began to purchase US goods and repaying loans in cheaper currency
Gold StandardToday, money is based on
“full faith and credit”
We accept dollars because:1.They are legal tender2.They are backed by the world’s
confidence in the US government
UnemploymentUnemploymentUnemploymentUnemployment
TownsTowns
Poverty and Poverty and FamiliesFamilies
Poverty and Poverty and FamiliesFamilies
Dust BowlDust BowlDust BowlDust Bowl
MigrantsMigrantsMigrantsMigrants
ShantytownsShantytownsShantytownsShantytowns
How the Other Half Lived…
Virginia Mansion
The Manor House (Long Island)
Springwood Mansion (FDR’s Home)
The Chimneys (Long Island)
Vanderbilt Mansion