Warm-up for 22-1

Video warm-up

What would happen if you spent more money than you actually had? What happens when many people and businesses are in that situation?

Economic Troubles key industries like railroads, textiles, steel made little profits in the 20’s coal mining competed w/ new forms of energy (oil, natural gas,

hydroelectric) housing fell (interconnected w/ many industries) farmers saw demand drop drastically after the war farmers defaulted on loans, losing property & rural banks began to fail bill called for price supports- maintaining of a price at a certain level by

the govt. (govt. buys surplus & sells it on the world market- Coolidge vetoed)

Economic troubles cont. Americans were living

beyond their means on credit consumers agree to buy now &

pay later for purchases

unbalanced distribution of wealth (rich got richer & poor got poorer) between 1920 & 1929, income of

wealthiest 1% of the pop. rose by 75%

more than 70% of the nation’s families earned less than $2,500 per year, then considered the minimum amount for a decent standard of living

only 1/2 the homes in cities had electric lights or a furnace

nearly 80% of all families had no savings

Election of 1928

Alfred E. Smith- D candidate

Herbert Hoover- R candidate – won w/ success of R party during the 1920’s (1929-1933)

stock market was the most visible symbol of a prosperous economy

Dow Jones Industrial Average- measure based on 30 large firms trading in the New York Stock Exchange (NYSE)

bull market- period of rising stock prices speculation- risky business transactions in order to make a

quick profit buying on a margin- paying a small % of a stock’s price as a

down payment & borrowing the rest (loan) (if the value of the stock declined, you would have no way of paying off the

loan)

The Crash Black Tuesday- October 29th, 1929 –

stocks fell drastically destroying confidence

16.4 million shares sold that day; $30 billion lost by November

$16 trillion lost in the Great Recession 2008-2012

General Motors fell from 73 points to 8

U.S. Steel fell from 262 to 21

Montgomery Ward (Sears) fell from 138 to 4

RCA fell from 101 to 2.5

Great Depression period from 1929-1940; economy worsened & unemployment rose banks that had invested in the market failed -11,000 out of 25,000 by

33’ (fed did not yet insure personal bank accounts) between 1929-1932 ~90,000 businesses went bankrupt unemployment rate shot to 25% US unable to import European goods affected an already weak

economy Hawley-Smoot Tariff Act- est. highest tariff in U.S. history

designed to protect from foreign competition cut off currency to the world & helped world trade drop 40%

Causes

collapse of the stock market

tariff & war debt policies that cut down the market for U.S. goods

a crisis in the farm sector

the availability of easy credit

an unequal distribution of income

fed. govt. kept interest rates low, allowing for easy borrowing & large debts

Date Closing Value Change on Day % Change on Day 1October 19 1987 1738.74 -508 -22.61 2October 28 1929 260.64 -38.33 -12.82 3October 29 1929 230.07 -30.57 -11.73 4November 6 1929 232.13 -25.55 -9.92 5December 18 1899 58.27 -5.57 -8.72 6August 12 1932 63.11 -5.79 -8.4 7March 14 1907 76.23 -6.89 -8.29 8October 26 1987 1793.93 -156.83 -8.04 9October 15 2008 8577.91 -733.08 -7.87 10July 21 1933 88.71 -7.55 -7.84 11October 18 1937 125.73 -10.57 -7.75 12December 1 2008 8149.09 -679.95 -7.7 13October 9 2008 8579.19 -678.91 -7.33 14February 1 1917 88.52 -6.91 -7.24 15October 27 1997 7161.15 -554.26 -7.18 16October 5 1932 66.07 -5.09 -7.15 17September 17 2001 8920.7 -684.81 -7.13 18September 24 1931 107.79 -8.2 -7.07 19July 20 1933 96.26 -7.32 -7.07 20September 29 2008 10365.45 -777.68 -6.98

Depression

Definition- No official definition. A severe recession with a 10% decline in GDP with an abnormally large increase in unemployment & a fall in the availability of credit is usually called a depression.

Frequency- Infrequent. 3 notable depressions -Great Depression in 1930s, Long Depression from 1870s-1890s, panic of 1837.

Recession

Definition- An economic contraction when GDP declines for two consecutive quarters is usually called a recession. (A general slowdown in economic activity results and unemployment rates rise.)

Frequency- Frequent. The National Bureau of Economic Research has identified 10 recessions.

People were forced to work for as little as 5 cents (1, 2001 dollar) an hour

The Gross National Product fell from $104 in 1929, to $59 billion in 1932

The income of the average farm family fell from $790 a year to $200 ($4,000 2001 dollars) year

Price of an average share of stock dropped from $310 in 1929, to $34 in 1932, or by almost 10 times or 1,000%

Warm-up for 22-2

Video warm-up

Try to imagine having no home to live in, no money to get food or clothing, and no government programs to assist you. Describe your feelings.

Cities people slept in parks, sewer pipes, wrapped in newspaper shantytowns- neighborhood of makeshift shacks soup kitchens- free or low cost food served to the needy bread lines- line of people waiting for free food (charitable

organization) conditions for African Americans & Latinos especially difficult

(AA unemployment rate was at 50% - many Latinos were deported by the govt.)

Rural Areas advantage- could grow own food many lost farms through foreclosure- mortgage holder

takes back property (~400,000 farms lost from 1929-1932) drought in early 30’s worsened conditions causes-plowing, overproduction, drought, little grass, &

winds blew away rich topsoil Dust Bowl- region of Midwest that was worthless to

farming by drought & dust storms during the 30’s (KS, OK, TX, NM, CO)

DUST BOWL DUST STORM – 2012- ARIZONA

Effects on Family

families stayed home entertaining themselves

Monopoly was invented in 1933

Men

discouraged after years of unemployment some abandoned families

hoboes (transient) –wandered the country on boxcars sleeping under bridges (estimated ~300,000)

no direct relief- $ payments or food provided by the govt.

Women

working women were resented

not seen on streets begging like men, but many were starving at home

Children

poor diets & lack of health care led to malnutrition

many schools closed resulting in children working in sweatshops

“Hoover tourists” children that toured the country for free on boxcars

rickets- (diet-related disease) the softening and weakening of bones in children, usually because of an extreme and prolonged vitamin D deficiency thousands of young WWII volunteers were

denied service because of the effects of malnutrition

falling tax revenue- by 1933, ~2,600 schools shut down, leaving more than 300,000 students out of school

Hoover tourists- from 1929-1939, 24,647 trespassers were killed and 27,171 injured on railroad property

Effects

from 1928-1932 the suicide rate rose more than 30%

depression forced many to accept compromises & make sacrifices (no $ for doctors or dentists, college, raising families)

an entire generation’s focus in life became financial security

Family Life in the Great Depression

Fertility Rates (per 100,000 women aged 15-44)in 1928: 93.8in 1929: 89.3in 1930: 89.2in 1931: 84.6in 1932: 81.7in 1933: 76.3in 1934: 78.5in 1935: 77.2in 1936: 75.8in 1937: 77.1in 1938: 79.1in 1939: 77.6in 1940: 79.9in 1941: 83.4in 1942: 91.5in 1943: 94.3in 1944: 88.8in 1945: 85.9

Average rate of death by suicide (per 100,000 population)1920-1928: 12.11929: 18.11930-1940: 15.4

Average divorce rate, (per 1,000 people)

1920-1929: 1.61930-33: 1.41934-39: 1.81940-46: 2.81947-64: 2.5

Warm-up for 22-3

Video warm-up

What objections might there be if the government helps people in need?

Hoover & advisors believed the economy would fix itself

govt. should foster cooperation between business & labor, not control it

opposed federal welfare (direct relief) to needy

Hoover asked employers not to lay off workers & unions not to strike (did not work- economy was

shrinking; unemployment rising)

Boulder Dam

dam on the Colorado River (authorized in 1929; built by 1936)

later called Hoover Dam

public works program that stimulated business & provided jobs

provides electricity, flood control, & water supply (drinking/agriculture)

It weighs 6.6 million tons. It was built with approximately 4,360,000 cubic yards of concrete. The concrete used to build Hoover dam, was cured with cooling tubes. If traditional methods had been used then, it would have taken at least 100 years for completion.

The reservoir created behind the Hoover dam is called Lake Mead, named after Elwood Mead, the head of the Bureau of Reclamation during the time. Today, it is the largest reservoir of the world, with a surface area of 146,000 acres.

It was estimated that about 16,000 people were employed for the construction of Hoover Dam, with about 3,500 employed at a time. The overall construction cost of the Hoover Dam was $49,000,000.

In 1985 the Hoover Dam was registered as a National Historic Landmark.

Hoover Dam has a storage capacity of 9.2 trillion gallons of water in its reservoir, the Lake Mead. Its 17 power generators have the capacity to produce 2,000 megawatts of electricity. To be more precise, it supplies electricity to more than 750,000 people and is a water source to over 25 million people in southwest United States.

One of the amazing facts about Hoover Dam is that it is made up of more masonry than the Pyramid of Giza.

About 4,000 tourists visit Hoover Dam every day.

political tide turned against Hoover & R’s as the depression worsened

Democrats won the House in the 1930 Congressional elections (missed the Senate by one vote)

“Hoovervilles”- shantytowns “Hoover blankets”- newspapers used by homeless “Hoover flags”- empty pockets turned inside out

Election Looming

Federal Home Loan Bank Act - 19321. lowered mortgage rates for homeowners

2. allowed farmers to refinance loans

Reconstruction Finance Corporation - 1932 emergency $ for banks, railroads, & large businesses

$ intended to trickle down to average citizen through job growth

*hungry & desperate people could not wait

The Reconstruction Finance Corporation (seen as a sub-reservoir) began under the Hoover Administration in 1932 and was responsible for distributing aid to state and local governments and making loans to banks, railroads, farm mortgage associations, and other businesses. Continued by the New Deal, it played a major role in setting up relief programs. Almost all loans made by this agency were repaid

Hoovers Image Further Damaged

Bonus Army- 10 -20,000 WWI vets & families who marched to D.C. in 1932 demanded payment of a promised bonus for their military

service (~$500 per soldier)

(approved by Congress in 1924, was to be paid out in 1945)

(eventually paid out early in 1936)

bonus voted down & most went home

Hoover had 1000 remaining vets gassed & burned shantytown