Download the great depression begins

THE GREAT
DEPRESSION
BEGINS

SECTION 1:
Photos by photographer Dorothea Lange
Lesson Objectives:
The Nation's Sick Economy
• 1. Summarize the critical problems
threatening the American economy in
the late 1920s.
2. Describe the causes of the stock
market crash and Great Depression.
3. Explain how the Great Depression
affected the economy in the United
States and throughout the world.

• To curb the financial loss of farmers,
Congress tried to pass the McNaryHaugen bill, which would mandate price
support on key crops
Young Hoover supporter in 1928
HOOVER WINS 1928
ELECTION
• Republican Herbert
Hoover ran against and
defeated Democrat
Alfred E. Smith in the
1928 election
– Hoover emphasized years
of prosperity under
Republican
administrations
– Hoover won an
overwhelming victory

THE NATION’S SICK
ECONOMY
As the 1920s advanced, serious problems
threatened the economy while
Important industries struggled, including:
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Agriculture
Railroads
Textiles
Steel
Mining
Lumber
Automobiles
Housing
Consumer goods
Chapter 14: Section 1
MAIN IDEA QUESTIONS
• A – What industrial weakness signaled
a declining economy in the 1920’s?
– The older industries such as textiles, steel,
and railroads, which were basic to the
fundamental well-being of the economy,
were barely profitable.
FARMERS STRUGGLE
• No industry suffered as
much as agriculture
• During World War I
European demand for
American crops soared
• After the war demand
plummeted
• Farmers increased
production sending
prices further downward
Photo by Dorothea Lange
CONSUMER SPENDING
DOWN
• By the late 1920s, American
consumers were buying less
• Rising prices, stagnant wages
and overbuying on credit were
to blame
• Most people did not have the
money to buy the flood of
goods factories produced
Chapter 14: Section 1
MAIN IDEA QUESTIONS
• B – What did the experience of farmers
and consumers at this time suggest
about the health of the economy?
– Beneath the surface prosperity of the
1920’s, the economy was in trouble.
SEEDS OF TROUBLE

• Too many Americans were
engaged in
– speculation – buying stocks &
bonds hoping for a quick profit
• Americans were
– buying “on margin” – paying a small
percentage of a stock’s price as a
down payment and borrowing the
rest
• Americans were
– buying getting easy “credit” –
Consumers agree to pay later for
purchases. Installment plan.
The Stock Market’s bubble was
about to break
Chapter 14: Section 1
MAIN IDEA QUESTIONS
• C – How did speculation and margin
buying cause stock prices to rise?
– They caused over investment as people
ignored the risk and bought more than they
could pay.
GNP DROPS,
UNEMPLOYMENT SOARS
• Between 1928-1932, the
U.S. Gross National
Product (GNP) – the total
output of a nation’s goods &
services – fell nearly 50%
from $104 billion to $59
billion
• 90,000 businesses went
bankrupt
• Unemployment leaped from
3% in 1929 to 25% in 1933
THE STOCK MARKET

• By 1929, many Americans
were invested in the Stock
Market
• The Stock Market had
become the most visible
symbol of a prosperous
American economy
• The Dow Jones Industrial
Average measures the stock
markets health
• The Dow is a measure based
on the price of 30 large firms
STOCK PRICES RISE
THROUGH THE 1920s
• Through most of the 1920s,
stock prices rose steadily
• The Dow reached a high in
1929 of 381 points (300 points
higher than 1924)
• By 1929, 4 million Americans
owned stocks
New York Stock Exchange
THE Stock market 
CRASH
• In September the Stock Market had
some unusual up & down
movements
• On October 24, the market took a
plunge . . .the worst was yet to come
• On Tuesday, October 29, the stock
market crashed known as Black
Tuesday
• 6.4 million shares were sold that day
– prices plummeted
• People who had bought on margin
(credit) were stuck with huge debts
By mid-November, investors
had lost about $30 billion

THE GREAT DEPRESSION
Alabama family, 1938 Photo by Walter Evans
• The Stock Market crash
signaled the beginning of
the Great Depression
• The Great Depression is
generally defined as the
period from 1929 – 1940 in
which the economy
plummeted and
unemployment skyrocketed
• The crash alone did not
cause the Great
Depression, but it hastened
its arrival
Chapter 14: Section 1
MAIN IDEA QUESTIONS
• D – What happened to the ordinary
workers during the Great Depression?
– Many were out of a job.
– Others experienced pay cuts and reduced
hours.
World Depression
• The U.S. was not the only country gripped by the
Great Depression
• Much of Europe suffered throughout the 1920s
• In 1930, Congress
passed the toughest
tariff in U.S. history
called the HawleySmoot Tariff
– It was meant to reduced
the flow of goods in the
U.S. and prevented
other countries from
earning US currency.
• Other countries
enacted their own
tariffs and soon world
trade fell 40%

HAWLEYSMOOT TARIFF
Chapter 14: Section 1
MAIN IDEA QUESTIONS
• E – How did the Great Depression
affect the world economy?
– World trade dropped, causing
unemployment to rise globally.
FINANCIAL COLLAPSE
• After the crash, many
Americans panicked and
withdrew their money
from banks
• Banks had invested in
the Stock Market and lost
money
• In 1929- 600 banks fail
• By 1933 – 11,000 of the
25,000 banks nationwide
had collapsed
Bank run 1929, Los Angeles
Chapter 14: Section 1
Guided Reading:
• Describe the serious problems in the Industry
area of the economy that helped cause the
Great Depression.
– Key industries barely made a profit;
– Some lost business to foreign competition and
new technologies;
– Some suffered from declining demand after WWI
– Coal declined due to new sources of energy
– New housing starts declined – affecting related
businesses.
Chapter 14: Section 1
Guided Reading:
• Describe the serious problems in the
Agriculture area of the economy that helped
cause the Great Depression.
– After WWI demand for products fell as did prices;
– Farmers could not pay debts and lost farms –
causing rural banks to fail;
– Congress passed supports for farm products – but
President Coolidge vetoed them.

Chapter 14: Section 1
Guided Reading:
• Describe the serious problems in the
Consumer spending area of the economy that
helped cause the Great Depression.
– Making credit available, businesses encouraged
Americans to pile up a large consumer debt;
– Faced with rising prices, stagnant wages, and high
levels of debt, consumers decreased their buying.
Chapter 14: Section 1
Guided Reading:
• Describe the serious problems in the
Distribution of wealth area of the economy
that helped cause the Great Depression.
– Nearly half of Americans earned less than the
minimum amount needed for a decent standard of
living.
– This unequal distribution meant most consumers
had too little money to buy American goods.
Chapter 14: Section 1
Guided Reading:
• Describe the serious problems in the stock
market area of the economy that helped
cause the Great Depression.
– Many investors engaged in speculation and
buying on margin, fueling the market upward and
generating great wealth, but only on paper;
– When the market crashed, many investors lost
their life savings.
GAP BETWEEN RICH &
POOR
• The gap between rich
and poor widened
• The wealthiest 1% saw
their income rise 75%
• The rest of the
population saw an
increase of only 9%
• More than 70% of
American families
earned less than $2500
per year
Photo by Dorothea Lange
CAUSES OF THE GREAT
DEPRESSION

• Farm sector crisis
• Too much easy credit
• Tariffs policies
– U.S. demand low,
despite factories
producing more
• Unequal distribution
of income
Chapter Review
SECTION 1
• How did what happened to farmers
during the 1920’s foreshadow events of
the Great Depression?
– Farm prices fell and farmers compensated
by boosting production.
– Farmers were not able to purchase their
share of America’s output
Chapter Review
SECTION 1
• What were some of the effects of the
stock market crash in October 1929?
– The Stock Market crashed on Tuesday
October 29, 1929 and caused panic and
fear across the country
– Marked the beginning of the Great
Depression.

Chapter 14: Review
• How did what happened to farmers
during the 1920’s foreshadow events of
the Great Depression?
– Farm prices fell and farmers compensated by
boosting production.
– Farmers were not able to purchase their share of
America’s output
Chapter 14: Review
• What were some of the effects of the
stock market crash in October 1929?
– The crash of 1929 caused panic and fear across
the country and
– marked the beginning of the Great Depression.