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THE GREAT DEPRESSION THE GREAT CRASH STOCK MARKET CRASH May 1928-September 1929, prices doubled in value Black Thursday (Oct. 24) largest sell-off in NYSE history Black Tuesday (Oct. 29) $40 billion in stock value lost by Dec. Black Tuesday Wall Street, Oct. 29, 1929 Stock Market Prices, 1921–1932 UNDERLYING CAUSES OF THE DEPRESSION Overproduction - Massive business inventories (up 300% from 1928 to 1929) Lack of diversification in American economy prosperity of 1920s largely a result of construction & auto industries Uneven distribution of income and wealth - Poor distribution of purchasing power among consumers Farm income down 66% in 20s By 1929 the top 10% of the nation's population received 40% of the nation's disposable income UNDERLYING CAUSES OF THE DEPRESSION Consumer Debt – middle class installment loans; buying on margin Overspeculation in Stock Market – by wealthy and upper middle class Consumer Debt, 1920–1931 Weakness of Banking Industry bank failures in late 1920s (farmers) many had small reserves low margins encouraged speculative investment by banks, corporations, and individual investors total money supply closing of over 9,000 American banks between 1930 and 1933 Federal Reserve system UNDERLYING CAUSES OF THE DEPRESSION Decline in demand for American goods in international trade European industry and agriculture gradually recovered from World War I Germany so beset by financial crises/ inflation that could not afford to purchase US goods High American protective tariffs international debt structure IMPACT ON SOCIETY Effects on Business & Industry Bank failures about 20% all banks (over 6000) between 1929 and 1933 over 9 million savings accounts lost($2.5 billion) Depositors gathering outside a bank, April 1933 Bank Failures, 1929-1933 1932 Effects of the Crash Great Crash World Payments Investors Investors lose millions. Businesses and Workers Consumer spending drops. Businesses lose profits. Workers are laid off. Businesses cut investment and production Some fail. Banks Businesses and workers cannot repay bank loans. Overall U.S. production plummets. U.S. Allies investors cannot pay have debts to little or United no money Savings Banks States. to invest. accounts run out are of money Europeans wiped and U.S. cannot out. fail. investment afford s in Bank American Germany runs goods. decline. occur German war . payments to Allies fall off. Effect on workers and families Unemployment ~25% in 1932? patterns of reemployment and layoffs soup kitchens and bread lines City & state relief systems in industrial Northeast and Midwest collapse Men Lined Up at the New York City Employment Bureau, 1932 Effects on Farmers “Dust Bowl” “Okies” Grapes of Wrath Resettlement Adminstration Dust Bowl Dust storm, Springfield, CO, 1935 Dust storm, Elkhart, KS, 1937 Aftermath of dust storms, South Dakota, 1936 Abandoned house, Kansas, April 1941 The Dust Bowl Dust Bowl Farm, Texas, 1938 Migrants A Destitute Family in the Ozark Mountains. 1935 Dorthea Lange, “Covered Wagon Again” 1935 “Okies” migrate west in 1939 Migrants in California "Cheap Auto Camp Housing for Citrus Workers“; Dorothea Lange, Tulare County, California, Feb. 1940 Migrant Auto Camp, California, 1936 Effects on African Americans High Unemployment – up to 50%: Last hired, first fired Competition for jobs Exclusion from relief programs Help from the New Deal? African American family during Great Depression in Scott’s Run, Virginia Evicted Sharecroppers along U.S. 60 in Missouri, 1939 HOOVER’S RESPONSE Federal Response Under Hoover Herbert Hoover (1929-1933) Philosophy: limited government, individualism Initial response? “rugged individualism” Hawley-Smoot Tariff (1930) Reconstruction Finance Corporation (1932) "Boulder Dam, 1942“, Ansel Adams Evaluation of Hoover’s Response Contemporary popular opinion “Hoovervilles”