Download Chapter 27.2

Chapter 27.2
THE GREAT DEPRESSION
The US Economy in the 1920’s
 Economic Growth






After WWI The US was an economic power but towards the end of
the 20’s they face a major crash
During WWI The US supplied much of the world with food and
supplies needed to fight
Growth was steady through the 1920’s
Industries started making more cars, radios, vacuums, washing
machines and more home appliances
During the 1920’a the overall value of the stocks traded at the
nation’s stock markets rose 400%
Many people flocked to buy stocks and even borrowed money to be
able to invest in stocks (which is called buying on margin)

This only drove the prices higher
The US Economy in the 1920’s
 Hidden Problems
 The new wealth being created was not distributed evenly


The richest 1% of the country population held 19% of the nations
wealth
Credit was very easy to attain which increased spending of
money that people did not actually have
This allowed the US economy to grow
 However by the end of the decade consumers reached their credit
limit and could not buy as much as they previously were

The US Economy in the 1920’s
 The Stock Market Crash
 Spending had significantly decreased so stock investors feared the their
stock would loose it’s value and they began to sell off their stocks



October 29 1929 known as Black Thursday investors sold off 16 million
shares






Large investors began to sell of their stocks which convinced others they
needed to do the same
The huge sell off began
With few people wanting to buy those shares the market was flooded
Stock prices collapsed
The Stock Market crashed
Many investors who had borrowed money to buy the stock had to sell
their stocks at a loss to help repay their loans
Many banks had provided loans and now these people could not pay
back their loans which devastated the banking industry and the
American economy
The American industry soon came to a halt
The Depression Spreads
 Following the stock market crash American economy
took a severe downward dive and the economic
downturn became known as The Great Depression and
was caused by several factors
 Industry Slows



Industry began to slow down before the stock market crashed but
was worsened by the crash
Factories had to lay off workers
By 1933 1 in 4 workers were unemployed and faced poverty.


This meant they could not buy food and goods for their families and
this hurt the industry even more
Many people that had savings banks feared they would lose their
money because banks were struggling to stay in business so they
withdrew their money causing banks to fail
The Depression Spreads
 Government Response
 US President Herbert Hoover believed the US should have
limited involvement in the business affairs
 Many of his advisors thought it was a normal cycle of the type
of capitalist economy The US had and did not think the gov’t
should get involved
 Eventually Hoover got somewhat involved but not enough to
really help
The Depression Spreads
 Roosevelt Elected
 1932 FDR was elected as the next US President
 FDR had the opposite view of Hoover and got the gov’t more
involved in the lives of the Americans
 He help start the program known as the New Deal
 New Deal was aimed at helping the Great Depression
It used gov’t money to help jump start the US economy
 It created many public work programs which created many jobs
 Gave gov’t money for the welfare program
 Created new regulations to help protect the Stock Market and the
Banking system

The Depression Spreads
 New Economic Theories
 John Maynard Keynes was a British economist who believed
economic downturn could be prevented by gov’ts spending
money even if it meant having an unbalanced budget
 He said that providing jobs would allow people to have an
income and would allow them to spend money which would
put money back into industry and the economy which would
end the depression
 This initially worked for the US economy but the Great
Depression lingered throughout the 1930’s.
Worldwide Depression
 Before the Crash






Before 1929 American was responsible for a majority of the rest of
world’s imports and lending
The American Great Depression directly effected the rest of the world
Most European countries were still struggling because of the war
Many Allied Powers were in a lot of debt to the US
In GB high interest rates led to decreased spending which resulted in
high un-employment
The German economy was horrible



Due to the high reparations they had to pay after WWI which led to
inflation, resulting in their money becoming valueless, ending in
economic depression
In 1927 Japan had to force their banks to shut down
The US Great Depression was just another economic turn for the
worst for these other countries
Worldwide Depression
 A Slowdown in Trade
 1930 President Hoover signed the Smoot-Hawley Tariff Act
which placed high taxes on import goods to encourage
Americans to buy American products

This led other countries around the world to place high taxes on
any American good that was imported
 The world trade almost stopped
• This made many countries economies collapse because they
depended on the money that came in from exporting goods
 Ex) Japanese silk dropped drastically in price when the demand
dropped. Silk exports made up 20% of the countries income. This
was one reason Japan entered into an economic depression
Worldwide Depression
 Political Impact




The postwar era made many countries politically unstable
New nations were forming from broken empires which left those
regions politically unstable
GB and France had the formation many new gov’ts because the
citizens were in desperate need of someone who could help
In other countries extremist were able to gained control as
economies worsened


Italy- Mussolini


Germany- Nazi party
 They blamed the Jews for their economic troubles
Tightened control on the entire nation
The wide spread misery made an ideal climate for the rise of
powerful leaders who promised to restore their nation to glory