THE NATION’S SICK ECONOMY
The Great Depression
Do Now What would happen if you spent more
money that you actually had?
What happens when many people and businesses are in that situation?
Examine the issues 1. What jobs are recession proof?
What things might you do is you cannot get a job with an established company?
What social services are available today compared to the unemployed people of 1929?
Objectives Summarize the critical problems threatening
the American economy in the late 1920’s.
Describe the causes of the stock market crash and the Great Depression.
Explain how the Great Depression affected the economy in the United States and throughout the world.
Economic Troubles on the Horizon Industries in Trouble
Basic industries such as railroads, textiles and steel barely made a profit in the late 1920’s
There was less demand for mining and lumbering after World War I
Economic Troubles on the Horizon Farmers Need a Lift
During the war demand for crops such as wheat and corn were high
Farmers took out loans for more equipment and land
After WWI, the demand for such crops declined and farmers were left with debt—farmers could not pay loans and many of their farms went into foreclosure
Economic Troubles on the Horizon _______________________
Federal price supports for key products such as wheat, corn, cotton and tobacco
The government would buy surplus crops at a guaranteed prices and sell them on the world market
President Coolidge vetoed the bill twice
Question What would a free market economist
say about the Congress’s bill for federal price supports?
Economic Troubles on the Horizon Living on Credit
Credit—the arrangement in which consumers agreed to buy now and pay later for purchases
When people had trouble paying off debt, they cut back on spending
Economic Troubles on the Horizon Uneven distribution of income
During the 1920’s rich got richer and the poor got poorer
More than 70% of the nation’s families earned less than $2,500 per year (considered a decent standard of living)
Many people could not afford the goods that manufactures made
Hoover Takes the Nation Election of 1928
______________( R) vs. ______________(D)
Hoover wins following the years of prosperity in the 1920’s
Hoover Takes the Nation Dreams of riches in
the Stock Market ____________________
The most widely used barometer of the stock market’s health
Made of the 30 largest firms traded on the stock market
Hoover Takes the Nation What is speculation?
What does it mean to buy on margin?
Hoover Takes the Nation Speculation —people bought stocks
and bonds in hope to make a quick profit
Buying on margin —paying a small percentage of a stocks price as a down payment and borrowing the rest The unrestrained buying and selling fueled
the market’s upward spiral
Think! What can speculation and buying on
margin be compared to today?
Homework Contrast the Great Depression with
today’s recession. Use the text book and internet to complete a Venn diagram.
What is a recession? Two consecutive quarters of negative growth in the GDP.
The Stock Market Crashes ________________
October 29, 1929 the bottom fell out of the market and people lost confidence
Shareholders rushed to sell their stocks
People who bought on margin were left with debt and many lost their life savings
Financial Collapse The Great
Depression Period from 1929-
1940 which the economy plummeted and unemployment skyrocketed
Financial Collapse Banks and Business Failures
Many people withdrew money from banks—only to find out that the banks had invested it in the stock market
600 banks closed in 1929
Unemployment went from 3% in 1929 to 25% in 1933
Financial Collapse Worldwide shock waves
Depression was not limited the United States
Europeans were still trying to recover from WWI
Germany was forced to pay war reparations—the Great Depression compounded the problems by limiting America’s ability to import European goods as well as making it difficult to sell American farm products and manufactured goods aboard
Financial Collapse _________________________
Highest protective tariff in history
Designed to protect American farmers and industry, it had the opposite effect
Europeans retaliated with their own tariff and worldwide trade had failed more than 40 %
Finical Collapse Causes of the Great Depression:
______________________________________ ________________________________________ _________________________________ ____________________________________
Close Can a recession or a depression be
prevented? If you were president, what policies would you put in place to ensure economic growth?