Download The Great Depression

The Great Depression
Causes and Impact
What is a depression?
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A period of severe reduced economic
activity
Sharp rise in unemployment
Decrease in consumerism due to
unemployment
The October 29th, 1929 was not the
only depression the US suffered but it
was by far the very worse.
Stock Market Crash - 1929
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#1 Margin Buying
– Speculators bought on margin
– Borrowed $ from stockbrokers
– Stock became collateral
– When stocks increased speculators sold the
stock, repaid broker & profited
– When stocks began to decline brokers called
in stocks
– When speculators couldn’t repay the loan
brokers sold the stockbrokers called in their
margins
#2 Overproduction
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AKA “plague of plenty” or “great glut” of farm &
factory goods
Nation’s ability to produce surpassed its ability to
consume
Profits of big business went to wealthy who
reinvested in factories rather than raising
salaries & wages which would have stimulated
more consumerism
Installment & credit also encouraged
overproduction while new technology added to
unemployment
#3 International Economic
Problems
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Remember the Dawes Plan? When US banks were
lending Germany $ so it could pay reparations to
Allies & speed recovery of the postwar economy.
During the “bull market” when stocks were
increasing banks stopped loaning as much $ to
Europe and loaned it instead to brokers who were
selling stocks on margin.
This decreased international trade
Followed by high US tariffs
Contributed to more underconsumption
#4 Restrictive Monetary Policy
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The Federal Reserve System which is
responsible for regulating the amount of
money in circulation followed a restrictive
policy that dried up credit.
Tightened the money supply
#5 Depressed Farms &
Industries
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Major industries laid off workers in
’20s
Less $ to consume projects
Who Was Hurt by the
Depression?
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Speculators & long term investors
Overnight they went from millionaires to paupers –
in a few months stock prices fell 75%
Joke at the time about guests checking in at a
home “For sleeping or jumping?”
Regular “innocent” people who put their
savings in banks.
Banks had lent $ to brokers, when margins weren’t
repaid they lost everything
Banks were not insured at the time like today
Depositors Waiting to
Withdraw their savings
Failure of the Banks
Hoover’s Initial Response
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His response was consistent with
Republican philosophy – minimal gov
interference in the economy
However….
Asked business leaders for a pledge not to
cut wages or production of goods
Suggested that city & state govs fund bldg
projects
Agric Marketing Act & Farm Board (?)
Farmers lost their mortgages
Depression Worsens
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1929 23,000 businesses failed; 32,000 in
1932
Average income in 1929 was $2300 reduced
to $1600 by 1935
Unemployment in 1929 was 5% and rose to
25% by 1932
Bread lines, soup kitchens, Hoovervilles
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Brother Can You Spare a Dime? Yip Harburg
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Soup Kitchen
Food lines
Poverty
Bread Line - NYC
Hoovervilles
Too Little Too Late
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Hoover reluctantly agrees to intro new gov
programs.
Reconstruction Finance Corp – largest fed’l
program ever at that time
Authorized to dispense $2 billion –
supposed to have trickle-down effect
Emergence Relief Act - $300 m to states
on verge of bankruptcy
Neither successful
Bonus Army 1932
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Veterans of Great War were promised a
bonus payment in 1945
Veterans organized the march to lobby
for early payment
Very well disciplined & organized
Agreed to honorable code of conduct
By the time they reached DC there were
1700
Senate rejected the bill
Aftermath
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Most veterans returned home
About 2000 remained
Hoover dispatched Douglas McArthur & his
aide Eisenhower to force veterans out
Cavalry, infantry, tanks, machine guns
were present
Torched the “Hoovervilles”
100 people injured
1 Child killed from tear gas
Bonus Army Encampments
1932
Bonus Army Asks for
Early Relief
US Army Uses Force to
Disperse Bonus Army
US Army Torches Camps
Hard times a “hoovering”
Impact of the Bonus March
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Political suicide for Hoover – seen as
bully
“Nailed his coffin shut”
Press commented “What a pitiful
spectacle that the American
Government, mightiest in the world,
chasing unarmed men, women and
children with Army tanks.”
The End Section 1