Download The Great Depression 2

The Great Depression
1929-1933
Causes
• Bank Failures
• Business Failures
• Unemployment
• Income & Spending
• Stock Market Speculation
Bank Failures
• Banks had invested in the Stock Market
– Couldn’t get the money they invested in the
stock market back after “Black Tuesday”.
– 600 closed
– 11,000 of 25,000 failed by 1933
Bank failures
4
3.5
3
2.5
2
Bank Failures
1.5
1
0.5
0
1929
1931
1933
Business Failures
Key industries were barely making a profit
-Railroads
-Textiles
-Steel
-Mining
-Lumbering
-Coal Mining
Boom industries of the 1920’s were weakening
-automobiles
-construction
-consumer goods
Business failures
35
30
25
20
Business
failures
15
10
5
0
1929
1931
1933
Business Failures Today
“Trickle Down Effect”
• New housing starts were down
Unemployment
• Trickle down effect would eventually effect
employment.
Unemployment in the 1920’s
• 2,132,000
unemployed
• Unemployment 5.2%
14
12
10
8
unemployed
6
4
2
0
1928
1931
Unemployment today
Income & Spending
• Americans of the 1920’s were living on
credit
• Businesses were actually encouraging
Americans to pile-up debt
Results of buying on credit
• Unfortunately many Americans had trouble
paying off their growing debts.
• Faced with debt, consumers cut back on
spending
• Businesses suffered
• The nation’s economy also suffered
• Today:
Uneven Distribution of Income
• The rich got richer
• The poor got poorer
75%
9%
Annual Income
• 70% of nation’s families – $2,500/year
($2,500 was considered the poverty line)
• Today:
Consumer Spending
• Some families earning 2X more than
$2,500 could not afford household goods
being produced
• Result: many products went unpurchased
• Businesses were left with unsold products
Stock Market Speculation
• People were engaging in “speculation”
Bought stocks and bonds on the chance of
a quick profit
Many ignoring the risk
The Reality of the Stock Market
• Buying on margin-buying on credit
Paying only a down payment for the
stocks you wanted and borrowing the rest
If stock price fell many could not pay the
outstanding amount owed
Typical Stock
• Today
BLACK TUESDAY
• October 29, 1929- stock prices fell and
investors raced to get their money out of
the market
• Many were unsuccessful at getting out
without huge losses
• Some investors lost their life savings
Worldwide Effects
• Europe gripped by Depression also
• Europeans can’t pay back their American
debts (Germany)
• Europeans can’t buy American farm
products or consumer goods
• Americans are forced to place high taxes
on imported goods (Hawley-Smoot Tarrif)
Hoover struggles with the
Depression
• Hoover believed that Americans could
help themselves through the Depression
• “Rugged individualism”-people should
succeed through their own efforts
Cautious Steps
• “Any
Any lack of confidence in the economic
future…
future…is foolish.”
foolish.” -Herbert Hoover
• brought together key leaders in business,
banking, and industry to find solutions to
economic problems
Employers
• Asked to NOT lower wages
• Asked to NOT lay-off workers
Labor Unions
• Asked to NOT Demand Higher wages
• Asked to NOT go on strike
Charities
• Hoover created an organization to help
private charities generate contributions for
the poor
Results of Hoover’s Cautiousness
•
•
•
•
•
Shanty Towns-(Hooverville)
Shrinking economy
High unemployment (and rising)
Business and Bank failures
Soup kitchens and bread lines more
common
• Hoboes continued to roam the nation
Projects approved by Hoover
• Boulder Dam-generates electricity and
provides water for cities like Las Vegas
and Los Angeles
“Mellon
pulled the whistle
Hoover rang the bell
Wall Street gave the signal
And the country went to
hell.”
Hoover forced to action
• Depression deepens
Hoover’s programs
Federal Farm Board-organization of farm
cooperatives
-raise crop prices
National Credit Corporation-loaned money
to banks
-to stave off bankruptcy
More Hoover programs
Federal Home Loan Bank Actlowered mortgages and allowed farmers to
refinance
-fewer foreclosures
Glass-Steagall Banking ActSeparated investment banking and
commercial banking
-to prevent another crash
Still More Hoover programs
• Reconstruction Finance Corporationemergency financing for banks, life
insurance companies, railroads, and other
large businesses ($2 billion)
-trickle down to average citizens through
job growth and higher wages
Indirect Intervention by Hoover
Hoover encouraged cities and charitable
organizations to have:
Bread lines
Soup lines
Direct relief
Footnote or Endnote
(1) G. Wayne Miller, King of Hearts: The
True Story of the Maverick Who
Pioneered Open Heart Surgery
(New York: Times, 2000) 245
Bibliography
Miller, G. Wayne. King of Hearts: The
True Story of the Maverick Who
Pioneered Open Heart Surgery.
New York: Times, 2000.
Comparing Footnotes/Endnotes
and a Bibliography
(1) G. Wayne Miller, King of Hearts: The
True Story of the Maverick Who
Pioneered Open Heart Surgery (New
York: Times, 2000) 245.
Miller, G. Wayne. King of Hearts: The
True Story of the Maverick Who
Pioneered Open Heart Surgery. New
York: Times, 2000.