The Aftermath of Black Tuesday How the Depression affected the lives of Americans

In the U.S., the 1920s was a decade of prosperity. Bold cultural ideas New inventions available to broad audiences CONFIDENCE in the U.S. economy What were the cultural ideas? Prohibition, new ways of dress What inventions? - radios, talking movies Confidence in US economy- people were buying things left and right, consumer society

How did the U.S. Economy grow so much in the 1920s? Lots of new inventions Automobiles Radios Telephones Telegraphs Lots of supply, not enough demand Solution? There was lots of supply of these things? What did companies do to fix the supply/demand?

Financing! 60% of Americans financed automobiles in the 1920s 80% of Americans financed radios in the 1920s Created an artificial demand (people were imagining they had money that they didn’t) They financed! That means they put it on credit. They could buy now, pay later.

The Stock Market in the 1920s A stock is a percentage – a piece - of a company. The value of stock is based on confidence in the total market for stocks, not the actual profits of that one company. The overall value of stock increased 120% from 1925-1929. A stock is a percentage of a company. IF you buy stock in a company, you basically own little pieces of that company. If the company is doing well, people have confidence in it, it may not be the actual profits of the company, or if people predict that company will do well. So more and more people were buying stock from 1925-1929.

The Upward Spiral (or so it seemed…) Americans borrowed money not just to buy goods, but also to buy stocks. Borrowing Money (Debt) It seemed like Americans were on an upward spiral, or so it seemed. Americans were borrowing money not just to buy goods, but to buy stocks in companys. If you borrow money, you are in debt to people. However, it increases yoru spending. IF peope are spending money, the economy looks good so people have confidence in the economy. If the economy has confidence, people want to invest in stock, here’s the cycle, then people are gonna borrow more money, and get in more debt. Desire to invest in stocks Increased Spending Economic Confidence

Economic Danger Signs of the 1920s Over-speculation on stocks with borrowed money Large gaps between the rich and poor Post-WWI international economic slump During the 1920s, speculators bought stocks with borrowed money and then pledged those stocks as collateral to buy more stocks. Collateral is an item of value that the borrower agrees to forfeit to the lender if the borrower cannot repay a loan. Brokers' loans went from under $5 billion in mid-1928 to $850 billion in September 1929. The stock market boom was based on borrowed money and optimism instead of real value."

Stock Simulation

Black Tuesday People started talking about how the money they thought they had was not worth what they thought, so people started selling their stock. As rumors spread about inflated stock value, Americans started selling. Greatest stock market crash in U.S. History on October 29,1929

A wave of panic-selling hit! People came rushing to banks to sell their stocks back The main problem with panic selling is that investors are selling in reaction to pure emotion and fear, rather than evaluating fundamentals. Almost every market crash is a result of panic selling. Most major stock exchanges use trading curbs and halts to limit panic selling, to allow people to digest any information on why the selling is occurring, and to restore some degree of normalcy to the market. 

What happened to consumers? Consumers were afraid of economic failure, so they stopped spending money. Businesses lost the profit they relied on. Businesses closed. People were afraid of the stock market failing, so they stopped spending money. If you don’t spend money, businesses lose money, which then made businesses close.

What happened to workers? As businesses lost money, salaries were lowered and many workers were laid off or fired. Many businesses couldn’t hire the unemployed because they didn’t have the funds to pay salaries. If you were a business, and you were afraid of losing money and everything, salaries were lowered and many workers were laid off or fired. Also, businesses couldn’t hire unemployed b/c they didn’t have the funds to sustain salaries.

Unemployment At the peak of the Great Depression, this many people wre unemployed. Now we have 7.8-7.9 unemployed which is a lot more than it used to be. Aberage unemployment rate for a while, was 2-3 percent. 24% - 50% of Americans were unemployed at the peak of the Great Depression.

The Downward Spiral UNEMPLOYMENT Less money to spend Businesses lay off workers Businesses can’t afford to pay workers This is the unemployment cycle. People have less money to spend, so they don’t spend it in businesses. Businesses lose profit. Businesses can’t afford to pay workers. Businesses then lay off workers, so more and more people keep losing money. Businesses lose profit

What happened to homeowners? As homeowners lost their jobs, they couldn’t afford to pay their mortgages. Banks foreclosed on loans. Homeowners became homeless. If you owned a home, and lost your job, and there was a slim to none chance of you finding a new job, you couldn’t pay your mortage. If you couldn’t pay your mortage to the banks, banks closed. So homeowners became homeless.

Bank Closings With so many mortgage foreclosures, banks could not return depositors’ money Banks closed. Depositors lost everything. With so many people not being able to pay their mortgage, banks couldn’t operate. Banks then close, if you had money in there, you lost all your money.

Look at the drop in banks that were open in the US.

BANK CLOSING SIMULATION

On an international scale… During WWI and after the war, billions of dollars were loaned to European Allies Allies struggled after WWI and couldn’t repay the money The U.S. increased tariffs to gain some of the money back in trade $ (Hawley-Smoot Tariff) – BAD IDEA! European countries retaliated with tariffs as well. The Smoot-Hawley Tariff Act of June 1930 raised US tariffs to historically high levels. This piece of legislation was originally intended to help protect domestic farmers against agricultural imports. During World War I, countries outside of Europe increased their agricultural production. Then when the war ended, European producers stepped up their production. Thus massive agricultural overproduction occurred during the 1920s. This in turn led to declining farm prices during the second half of the decade. One of Herbert Hoover's campaign pledges during the 1928 election campaign was to aid the American farmer and others by raising tariff levels on agricultural products. This hurt us bevause other countries retaliated with tariffs as well.

People living out of their car, tent communities

Eating off of boxes , the kids look dirty

School hosues, chairs for seats,

How now would you provide for your family? Many moved west in search of work, after all, farms will need workers as long as people need to eat! EXCEPT…

The Dust Bowl Environment was bad as well!! Caused by bad farming practices in the 1920’s (lack of crop rotation and overplowing) Drought and wind caused the land to be unfarmable.

Effects of the Dust Bowl Farm foreclosures Food became scarce. Dust got in everything!

The Great Depression People were desperate. Americans blamed themselves Suicide rates at an all-time high It seemed there was no end in sight.

Is it time for a change? Presidential election of 1932 Herbert Hoover vs. Franklin Delano Roosevelt http://www.storyboardthat.com/storyboards/richard-cleggett/ hoover-vs--fdr--the-election-of-1932