Download Crash and Depression

Crash and Depression
Chapter 15
1929 - 1933
Setting the Scene

October 29, 1929
CRASH!
The Market Crashes
NOTE: A stock’s value
SHOULD be based on
the company’s earnings
and assets.
 BUT: Demand and
speculation can make a
stock price go up even
more.

Think of auctions
The Market Crashes
Leads to OVERVALUED
stocks.
 Then, if you borrowed
money to get the stock
…

CRASH
Example:




The value of the swan beanie
baby is $5.
BUT you’ve seen these go
on eBay for $150.
The price is $150 for the
beanie baby swan. Others go
for even higher.
You borrow $150 from a bank
to buy the beanie baby.
20% interest ($30) total $180.
Example
You have a $180 beanie
baby.
 What happens when
people no longer want to
pay that much?
 The price goes down to
$5?
 YOU ARE BROKE and
OWE MONEY!

October 29, 1929

THAT is what happened
to ALL stocks.
Investors lost money
Businesses lost profits
Workers were laid off
Banks who had loaned
money failed when
people couldn’t pay back
their loans.
October 29, 1929
Because investors were
consumers – they had
NO money to buy things.
 Businesses couldn’t sell
products.
 Laid off workers.
 Who couldn’t buy things
then.
 Businesses failed.

Black Tuesday: October 29, 1929

To stop the panic of
Thursday, bankers
pooled their money to
buy up stocks to make
things look stable for
Friday and Monday
October 29, 1929
Because investors
couldn’t pay loans back
to banks ..
 Because businesses
couldn’t pay back loans
to banks
 Because banks had also
been speculating on the
stock market with
savers’ money …

October 29, 1929
Banks are rumored to be
failing
 Bank runs to try to get
money out of banks.
 But THERE WAS NO
MONEY!
 BANKS FAIL and close.

October 29, 1929

Because Americans have no
money to invest
Global investments fall
Unemployment happens in
other countries
The rest of the world can not
afford US goods
Europe can’t pay off their war
debts to US businesses
Closes more US factories
People asked “How did this
happen?”

Black Thursday:
Some banks and brokers
began to call in loans
after stocks began to fall
in value.
People who had bought
General Electric at $400
had to sell for $283.
In one day
$3,000,000,000 was lost!
Black Thursday: October 23, 1929
4 – 8 million shares of
stock were sold.
 Reassurances from
stock specialists and the
President.
 “The nation’s business
is on a sound and
prosperous basis.”

October 29, 1929: The Great
Crash
It wasn’t enough!
 Tuesday – people
panicked.
 16 million shares were
sold.
 When there is more
supply than demand

PRICES GO DOWN,
DOWN, DOWN, DOWN
October 29, 1929: The Great
Crash
Overall losses
$30,000,000,000
 The business cycle – a
period in which the
economy grows then
contracts.

The Ripple Effect of the Crash

Someone who thought
and lived like they had a
million dollars
Found out they only had
$100.
Ripple Effect on the Economy

Risky loans hurt banks
Banks earn their profits
on the interest they earn
for loaning out money.
Gave out HUGE amounts
of loans on very risky
loans.
Ripple Effect for the economy

Consumer borrowing:
Banks also make money
on loans they make to
consumers to buy cars,
appliances, etc.
Consumers lost money
and / or their jobs and
could not pay their debts
to the bank.
Ripple Effect on the Economy

Bank Runs:
People rushing to the bank to
get their money out.
Banks didn’t have enough
money in the vaults to give
people withdrawing.
Banks had to call in loans to
get some money.
Consumers and businesses
did not have the money
Ripple Effect on the Economy

Savings wiped out
By 1933 9 million savings
accounts had vanished.
Ripple Effect on the Economy

Cuts in Production
Businesses had no
money to keep producing
goods.
Few people had the
money to buy goods.
Ripple Effect on the Economy

Rise in unemployment
Businesses laid off
workers.
Ripple Effect on the Economy

Further cuts in
production as
unemployment grew and
incomes shrank,
consumers spent less
and less money and
businesses produced still
fewer goods.
Economic Contraction

An economic decline
marked by falling output
of goods and services.
THE GREAT
DEPRESSION
– Lasted until 1941
The Great Depression: Impact on
Workers and Farmers

August 1931 – Ford
closed its Detroit
factories.
75,000 unemployed in
one day.
Millions others
unemployed.
The Great Depression: Effect on
Workers and Farmers

Because large factories
closed – small
businesses and
restaurants began to fail
too.
No customers
No merchandise
Rich people laid off staff
The Great Depression: Effect on
Workers and Farmers
Farm prices that were
already low, fell even
more.
 1929: 1 bushel of wheat
was $1.18
 1932: 1 bushel of wheat
went for 42 cents
 DISASTER FOR FARMS

The Great Depression:
Underlying Causes
Unstable economy
 Overspeculation

Optimism was more than
real value for goods.

Government policies
Too late, the government
in 1929 tried to stop the
overspeculation.
Only made it worse.
Hoovervilles

How did people “get
by”?
Houses with extended
families.
Drifted as hobos, migrant
workers
Shantytowns
“Hoovervilles”
Hoovervilles
Depression’s Effect on Health

“No one has starved.”
President Hoover
Effect on Health
But some did.
 Thousands went hungry.
 Poor, hungry and without
shelter – more prone to
illness.

Particularly children.
Impact on Health

In the country, people grew
food.
Used for food and to barter for
other goods.



In the cities, sold apples and
pencils.
Begged for money and food.
Fought over restaurant
garbage.
Stress on Families
Men felt like failures for
not providing for families.
 Women were often fired
for “taking” jobs from
men.

Particularly if married

Women took low-paying
jobs as domestics.
Discrimination Increases

Times created hostilities
against minorities.
Whites were willing to
take the low wages of
Asian-Americans,
Hispanics and AfricanAmericans.
Mass deportation of
Mexican-Americans –
even though they were
born in the USA!
Discrimination Increases

The Scottsboro Boys
Nine African-American boys
riding the rails were accused of
raping two white women in
Scottsboro, Alabama in 1931.
Eight were sentenced to die.
YEARS before their
convictions were overturned.
President Hoover’s Response?
Said if Americans had
“confidence” things
would get better.
 Blamed other countries
not the American
economy.
 Tried to tell people the
factories would quickly
reopen.

President Hoover’s Response

Voluntary Action
Let volunteer
organizations like church
charities and local
governments help
people.
It wasn’t Washington’s
job to support and help
people.
President Hoover

After 1931, he did try
SOME federal programs
to help people – but it
wasn’t enough.
Hoover thought
government aid would
cause people to lose their
self-respect.
Veterans March on Washington

20,000 WWI vets and
their families came to
Washington to try to
claim “bonuses” the
federal government had
promised to pay in 1945.
They needed the money
in 1932!
Bonus Army
Most were peaceful.
 Hoover called in the
army to drive the
marchers’ out of
Washington DC.

General Douglas
MacArthur used force.
Many were injured by
gunfire, tear gas, fire.
Election of 1932
Republican: Herbert
Hoover
 Democrat: Franklin D.
Roosevelt
 Who do you think
won???

Election of 1932

Electoral Map