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SSUSH17
The student will analyze the causes
and consequences of the Great
Depression
17.a- Describe the causes, including overproduction,
under-consumption, and stock market speculation that led to the stock
market crash of 1929 and the Great Depression
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Despite the booming economy and marked rise in the standard of living for most middle class
Americans in the 1920s, there were several important economic weaknesses under the surface of
the general prosperity. These weaknesses ultimately led to the stock market crash of 1929 and the
resulting Great Depression of the 1930s.
Firstly, as European agricultural markets returned to stability after WWI, agricultural prices in the
United States fell sharply due to the global glut. But booming industrial output obscured the
economic dangers of a prolonged decline in the agricultural sector.
Industrial over-production also became a major issue as the 1920s progressed. As production
outpaced consumption, inventories piled up and began to drive prices down. The market demand
for consumer goods, which had driven the industrial boom, was saturated.
The stock market crash in October 1929 proved to be the final blow to the façade of prosperity.
Investment in the stock market declined significantly in the 2nd and 3rd quarter of 1929. As with the
saturation in the consumer goods market, stocks had run out of buyers. Worse yet, the rapid rise of
stock prices in the 1920s was fueled by speculators who often had heavily borrowed to buy stocks
on “margin”- meaning that their credit was based on the future dividends of the very stock they
were buying.
Investors sensed the impending trouble and initiated a selloff of stocks in September, driving down
prices. On October 24 (Black Thursday) the bottom fell out and frenzied selling caused prices to fall
further. The following Tuesday (Oct 29, “Black Tuesday”) stocks took their biggest hit yet, losing
around $15 Billion. By November losses totaled over $30 Billion, or roughly equivalent to the total
wages of American workers in that year. The Crash was not the only cause of the Great Depression,
but it exacerbated the already existing economic weaknesses to cause the severe economic woes
of the 1930s.
Black Tuesday: Hysteria on Wall St.
17.b- Explain the impact of the drought in the creation of
the Dust Bowl
• To add insult to the injury of widespread economic depression, in
the early 1930 regions of the Great Plains experienced a prolonged
and severe drought.
• A century of homesteading and rapidly expanding agriculture
denuded the plains of most of its native grasses, and when the
agricultural markets collapsed, many farmers left fields fallow,
which in the drought, caused the soil to evaporate to dust.
• The strong winds of the plains then stirred the dust into massive
storms that enveloped the entire region. (In one of the most severe
storms, dust from the Great Plains reached Washington D.C.) The
Bread Basket of the United States was now a Dust Bowl.
• The Dust Bowl caused a mass migration from the Great Plains and
inspired some of the most desperate stories of hardship from the
Great Depression era.
17.c- Explain the social and political impact of widespread
unemployment that resulted in the development of Hoovervilles
• Following the stock market crash, the economy continued
to spiral downward, reaching a nadir in 1932 and 1933.
Banks began to fail in large numbers, 1350 in 1930, 9000 by
1933. As banks failed, so did businesses large and small,
and by early 1933, unemployment reached 25%.
• Unable to pay for housing, large numbers were forced to
live in shantytowns that came to be known derisively as
“Hoovervilles.”
• Herbert Hoover was elected president in 1928, during the
height of the economic boom. After the onset of
depression, many blamed Hoover for not taking actions to
prevent the collapse of the U.S. economy.