Warm UpISN, pg. 65

• What do you think is the most important issue facing the president today and why?

Income inequality

The Great DepressionCornell Notes

Postwar Economic Boom: 1920 - 1929

• National Income Grew• 1929, $87 Billion, 43% increase from 1922.

Result: more money to spend on luxury items

• U.S. Factory production Grew• up 72%, business profits rose 80%

• U.S. Stock Market Value Grew 1929• one billion shares were traded;

• Banks, Companies urged Americans to invest and buy with credit, as much as they could.

Signs of the Coming Depression 1929

• Unemployment and poverty on the rise

• Farmers losing their farms

• Stock Market Crash of Oct. 29, 1929

1. Over-speculation

2. Consumer debt

3. Factory overproduction

4. Decline of farming industry

Real Estate and Stock Speculation

• Speculation: making a risky investment to make a quick profit

• Unregulated Stock Market Speculation: belief that the market would never go down

• The constant buying and selling of stock and houses for a profit created artificially inflated prices

• By 1929, investors predicted a stock market crash

Stock Market Crash and Banking Industry Collapse

• 1929 Investors began selling off stocks • stock prices started to drop; • production in factories slowed down;• business credit not available;• prices began to drop

• Oct. 24 ,1929: sell orders flooded the New York Stock Exchange

• Oct. 29, 1929: “Black Tuesday” • $16 Billion were lost in the stock market

Bank Failures

• Stock market crash caused banks to collapse: • Banks loaned too much to investors

• Results:• 1.Families that “played” the stock market lost all their

savings • 2. Stock investors couldn’t repay loans to the banks• 3. Mortgage loans went into default • 4. In 1933, 4,000 banks in America closed

Overproduction

• Industrial Goods 1929: High factory output, consumers-not enough money to buy things

• Agricultural Goods 1929: Expensive tractors and farm equipment allowed improved farming.

• Left large surplus of foods and no market to sell, caused farmers to go bankrupt

The Toll on the Farming Industry

• 1929: Farms were in great decline in the U.S.• Farmers couldn’t sell their surplus and defaulted

on their bank loans• Early 1930s: Farmers’ income dropped 50%,

millions of families lost their farms• The Dust Bowl: Drought in the Midwest and

Southwest U.S.• Farmers went to California to find work in

agriculture jobs.

Republican Economic Policies

• Pres. Calvin Coolidge (1923-1929), “The business of America is business.”

• Believed in “trickle-down economics:” • tax cuts for big business and wealthy people will eventually

benefit all Americans

• Secretary of the Treasury, Andrew Mellon: • cut taxes for business and the wealthy; • increased taxes for middle and lower classes.

• “Trickle-down” effect didn’t work: • Wages stayed low, • the gap between rich and poor increased.

Republican Economic Policies

International Economic Policies 1920s

• U.S. lent European Allies $11 billion during WWI• U.S. banks loaned Germany money

• to pay England and France • so they could pay back U.S.

• U.S. imposed tariffs on imported goods,• Smoot-Hawley Tariff 1930• to protect American industries• discouraged buying foreign products

• European countries went further into debt

Unequal Distribution of Wealth

• 1929: 1% of population held 58% of wealth • 60% of families lived in poverty (under $2000/yr)• 1920-1929: Average income increase: 9% Wealthy income increase: 75%• 1929: To much credit debt and no ability to pay

the bill, • Consumers’ buying power was lost.

• 1930s: Worst economic depression in the 20th century

Hoovervilles

Demonstrate your understanding…

• On binder paper: Imagine yourself a grandparent who lived as a teenager in the 1930s, during the Great Depression.

1.Write a letter to your grandkids explaining what the country was like before Oct. 29, 1929. Give details about the prosperity of the time.

2. Describe and explain at least four conditions in the economy that led to the Great Depression

Letter to Grandkids continued

3. Tell them about three specific changes that our country experienced after Oct. 24,1929.

4. Explain “trickle down economics” in a way that grandkids can understand

5. Describe how the unequal distribution of wealth affected your family’s life compared to 1% of the population.

6**Most important paragraph: Give them advice on how they can avoid this Great Depression from ever happening again.

• Highlight the terms used from your notes.