Cause of Great Depression

Warm-up View the picture on the next slide Answer the following questions: – 1. What time frame do you think this is taking place during? – 2. What are these people doing? – 3. What is going on in the world to cause this?

1. What time frame do you think this is taking place during? 2. What are these people doing? 3. What is going on in the world to cause this?

Goals What were the causes of the Great Depression? What were the causes of the world wide Depression? What is Fascism? How did the depression and other events lead to the rise of Fascism?

Roaring 20’s

19 th Amendment- 1920

Prohibition

Consumer goods

What is a stock? Shares Dividends Profits Supply and Demand

games.com/lemonade/

What went wrong recently? 1.Loans to unqualified 2.Larger credit loans 3.Demand gets filled up; leads to too much supply 4.Economy slows (housing industry is top #3)=Jobs lost 5.Cant pay back $= Foreclosure=SURPLUS=H ome Values drop

Herbert Hoover Franklin D Roosevelt Henry Ford

Causes of Economic instability and the 1929 Crash 1. Uneven distribution of wealth 2. Overproduction of goods/crops 3. Decreased demand for consumer goods 4. Buying on margin/credit 5. Stock and Bank failures

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

Uneven distribution of Wealth

19 Chart showing wages of unskilled workers. Notice how little the wages changed during the supposed prosperity of the 1920’s.

Farmers’ Dilemma Forced to take out loans to pay for new industrialized equipment Industrialized equipment increased surplus of agricultural products Prices Fall as surplus increases Farmers can not pay loans off Land and equipment becomes foreclosed

Farm Foreclosures Thousands of farmers, however, lost their land Many turned to tenant farming and barely scraped out a living Between almost ½ million farmers lost their land

22 Agricultural product Corn (per bushel) Wheat (per bushel) Oats (per bushel) Butter (per lb) Butterfat (per lb) Wool (per lb) Hogs (per cwt) Milk (per cwt) Table shows the sharp decline in the prices of various products from American farms

Dust buried cars and wagons in South Dakota in 1936

25 Installment buying, using credit and paying back in small amounts, was introduced which allowed people to buy cars, radios and other new products of the 1920s.

SEEDS OF TROUBLE By the late 1920s, problems with the economy emerged Speculation: Too many Americans were engaged in speculation – buying stocks & bonds hoping for a quick profit Margin: Americans were buying “on margin” – paying a small percentage of a stock’s price as a down payment and borrowing the rest The Stock Market’s bubble was about to break

THE 1929 CRASH 4 Million Americans owned stock On October 29, now known as Black Tuesday, the bottom fell out 16.4 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

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 banks fail By 1933 – 11,000 of the 25,000 banks nationwide had collapsed Bank run 1929, Los Angeles

GNP DROPS, UNEMPLOYMENT SOARS Between , 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 Great Depression – 90,000 businesses failed. – 9,000 banks closed and depositors lost $2.5 billion. – Expenditures for goods decreased by 45%. – Unemployment rose from 3% to 25% - with 13 million out of work. – Workers incomes dropped 40% - average annual incomes dropped 35%, from $2,300 to $1,500 – People not only lost their jobs, they also lost their houses and apartments. – Family structures were strained and sometimes shattered. – Thousands of youths became homeless - Riding the Rails

Why it spreads? US produces 60% of goods for the world Tariffs are proposed=Inc supply=prices fall World Trade cut by 65%

Causes of World Wide Depression European countries follow U.S. policy of imposing high tariffs Europe is in recover mode after WWI Unemployment rises Inflation rises NO GOVERNMENT PROGRAMS to protect or reduce impact

Tariffs Tax on imports Goal is to keep domestic goods cheaper In the U.S., import taxes (tariffs) "imposed an effective tax rate of 60% on more than 3,200 products and materials imported into the U.S.," quadrupling previous tariff rates. (Smoot Hawley data)

inflation

Impacts of the worldwide depression

Wages were paid daily or several times a day, and the whole family would immediately go out and spend the money before it lost value. "Workmen are given their pay twice a day now--in the morning and in the afternoon, with a recess of a half-hour each time so that they can rush out and buy things--for if they waited a few hours the value of their money would drop so far that their children would not get half enough food to feel satisfied."

Rise of Dictators Why did it happen in Italy and Germany? Why not US or England?

German Election of Nazi members to the Reichstag between June May Dec May Sept July Nov Mar

Warm-up HPOP Take out notes from last class What events or policies lead to the great depression? (3)

Closure What events lead to the rise of Fascism in Europe?