The Great Depression

1. The Great Depression

2. Economic Troubles on the Horizon • Both consumers and farmers were going into deep debt. • Key industries were struggling to make a profit. • Mining, and timber were no longer in high demand. • Housing sales began to fall leading to a trickle down effect.

3. Buying on credit • Keeping up with the Joneses. Even though Americans appeared to be prosperous they were in fact living beyond their means. • Easy Credit: Credit during the 20’s was so easy to come by and many businesses encouraged consumers to buy products using installment plans. People began having trouble making payments.

4. Uneven Distribution of Wealth • During the 20’s the rich got richer while the poor got poorer. • By 1920-1929 income of the wealthiest rose by 75%, while income as a whole rose only 9%! • The unequal distribution meant that most Americans could not fully participate in the prosperity of the 1920’s.

5. Election of 1928 • Herbert Hoover (Republican): Personable and was able to point to years of prosperity amongst Republican leadership • Alfred Smith: Democratic challenger to Hoover. • Hoover easily won. Most Americans happy under Republican leadership.

6. Stock Market 101 • Companies need money to operate. • The Public buys “shares” in the company. At a later date they can unload their shares on someone else in exchange for a profit. • More times than not the public does not have that kind of money. To get started a lot of people will borrow money from the bank. • Pros: You can make a lot of money • Cons: it’s risky

7. Economic Disaster Around the Corner • By 1929 most Americans oblivious to what lay ahead. • Dow Jones Industrial Average: Most widely used barometer of the market. • By 1929 4 million Americans owned stock. • Speculation: buying stocks and bonds on the chance of a quick profit, while ignoring the risks. • Buying on Margin: Only paying for a fraction of the stock out of pocket while borrowing the rest.

8. Stock prices peaked in September of 1929 and began to decline. Panicked investors began to unload their shares. October 29, 1929: Record 16.4 million shares sold that day! $14 billion just evaporated! By the end of the week $30 billion lost! Black Tuesday

11. Market did not recover its pre 1929 levels until 1954!

12. Bank and Business Failures • Stock market crash signaled the beginning of the Great Depression. • Bank runs: After the crash people panicked and began withdrawing money from the banks. • Because a lot of banks had their money in the stock market, many did not have enough cash to give out to their depositors.

13. Bank Run

14. Let’s Do the Numbers • By the end of 1929, 600 banks closed. By 1933, 11,000 of the nations 25,000 banks had failed. • Because the government did not insure or protect bank accounts, millions of people lost their savings.

15. Unemployment • In 1929, unemployment was at 3%. By 1933, it had jumped to 25% (not counting those who still had work, but were under employed).

16. It Wasn’t Just America • Europe was still trying to make payments on WWI debt. They relied heavily on Americans buying their goods. This trade relationship all but stopped. Germany was hit the hardest. • Hawley-Smoot Tariff Act: Designed to protect American farmers and manufactures from foreign competition. Did not work. • Many countries retaliated by raising own tariffs. Within a few years, world trade had fallen by 40%.

17. Shantytowns (Hoovervilles)

19. Men wander the streets looking for work

20. Women struggle to survive

22. Soup Kitchens

23. Severe drought that plagued the Great Plains in the 1930’s. Plagued by dust storms and evictions, many farmers left and headed on route 66 to California. Known as “Okies” The Dust Bowl

26. Hoover’s Response • After crash, tried to reassure the nation, “Any lack of confidence in the economic future is foolish”. • At first opposed any form of public welfare. • Later he tried to use the government to provide relief. • Public works programs (Boulder Dam) • Federal Home Loan Bank Act

27. Boulder Dam • Later called Hoover Dam • Construction of a dam on the Colorado River. Financed the project by using the profits from the sales of the electric power the dam would generate. • In addition to providing electricity, it would provide water supply, which enable growth in California’s massive agriculture economy.

28. Federal Home Loan Bank Act • With re-election looming, Hoover appealed to Congress for bank reform. • In 1932, signed into law the Federal Home Loan Bank Act, which lowered mortgage rates and allowed farmers to refinance their farm loans to avoid foreclosure. • Reconstruction Finance Corporation: Authorized $2 billion for emergency financing for banks, life insurance companies, railroads, and other large businesses.

29. Bonus Army • In the spring of 1932, between 10,000 and 20,000 World War I veterans arrived in Washington D.C. • Came to support the Patman Bill which was under debate in Congress. • Patman Bill (approved in 1924) authorized government to pay a bonus to WWI veterans who were not adequately compensated during the war. This bonus was to be paid out in 1945. • Congressman Patman believed should be paid now!

30. Hoover Did not support Patman Bill, believed the marchers were not really veterans but criminals. Group became violent when the bill was struck down. Hoover sent in troops to disband the veterans. Hoover’s Reaction

31. Hoover’s Image

32. Election of 1932

33. What about Today? • Some people call it the Great Recession • Has lasted longer than previous recessions in 70’s and 80’s. • Officially began in 2007; some economist argue it is over.

34. What is a Recession? • A period of time in which the economy slows down, people lose their jobs, and consumers cut back on buying products.

35. Why won’t it be another Depression? • We learned our lesson….there are more safeguards in place. • Unemployment insurance, Social Security payments and larger government at the federal, state and local levels keep money flowing into the economy even as consumers and businesses pull back on their own spending.

36. Federal Reserve has pumped money into the system with lending programs. • During Great Depression, lending of money was tightened. • But….household and government debt, unemployment hurts.

37. Movies Radio Boxing Art Literature Culture of the 1930’s