THE GREAT DEPRESSION Sec. 25-1 Pages 724-728 Define: Stock exchange – buying on margin – speculation – default – relief – public works- rout Identify: Black Thursday - Black Tuesday – Hooverville Herbert Hoover – Reconstruction Finance Corp. – Bonus Army- Douglas MacArthur – Explain how speculation will affect the stock market business in the 1920s. List the causes of the Depression – review each area Explain how Pres. Hoover responded – impact on America – public view of government

STOCK MARKET In mid 1920s, stock values rose dramatically. Stock exchange – an organized system for buying & selling shares in corporations Speculation – a risky business venture involving buying & selling in the hope of making a large, quick profit. Investors didn’t always pay full price- Buying on margin – buying of stock by paying a small fraction(5%-10%) of the stock price and borrowing the rest from brokers

Buying on Margin Example: An investor with $500 could buy : 50 shares costing $10 a share (paid in full) or 100 shares on margin worth $1,000 (paid as little as $50 – owe $950). As long as the value of the stock rose, the buyer could sell later, pay back what he had borrowed, and make a profit. If the value falls, investors and brokers quickly sell before they lose their initial investment.

STOCK MARKET CRASH Sept. 1929, stocks reached record levels – fearing end is soon, investors began selling their stock – prices fell Brokers demanded repayment of loans Investors who bought on margin were forced to sell Black Thursday –Oct. 21 – 24, 1929 Panic - Investors sold almost 13 million shares Black Tuesday, Oct. 29, 1929 – more than 16 million shares sold – prices fell – people and banks lost all savings New York Stock exchange closed for a few days to prevent more panic selling.

SUMMARIZE Vocab term - an organized system for buying & selling shares in corporations Vocab term- a risky business venture involving buying & selling in the hope of making a large, quick profit Vocab term– buying of stock by paying a small fraction of the stock price and borrowing the rest from brokers When did the stock market crash? What is the day known as?

GREAT DEPRESSION Period of severely reduced economic activity Since early 1920s problems began Unbalanced economy – farmers income fell – textile, lumber, mining, railroad industries declined – auto industry orders declined – laid off workers – cut wages – warehouses full of consumer items 2. Wealth and distribution – gap between rich and ordinary Americans – 75% lived in poverty 1% owned 33% of nation’s wealth

GREAT DEPRESSION Problems ( continued) 3. Credit crisis – 1920s people borrowed money from banks – many loans were defaulted (fail to meet loan payment) Millions of people lost deposits in banks – banks used people’s money for investing 4. International crisis – trade slowed down 5. Joblessness and poverty – By 1933, 25% of American workers were out of work

SUMMARIZE What were the 5 problems that caused the Depression? U________ E______ W____ and D______ C_____ C_____ I________ C_____ J_________ and P______ What vocab term means to fail to make a loan payment? What percentage of people were out of work?

Immediate Results People stood in breadlines for food – ate at soup kitchens

Breadlines Hungry people waited for hours in long lines to get a slice of bread, a cup of coffee, soup or to get apples. Food provided was just for a day to two – not large amounts given. Forced people to humble themselves

People lived in Hoovervilles ( make shift town – shantytowns - made out of cardboard, tin sheets) in isolated areas of a city. Hoover refused direct aid.

Brother, Can you spare a dime? Song of era Pres. Hoover thought the crisis was temporary – called on businesses to NOT cut wages or production – asked for voluntary action by citizens and state/local governments to give relief (aid to the needy) 1931- Hoover authorized federal spending on public works (projects such as highways, parks, libraries) to create new jobs Money used up too quickly.

Reconstruction Finance Corp. 1932 – RFC – loaned money to businesses (railroads, banks) and provided funds for state and local relief programs Little of gov’t budget $ was not spent for fear of risky loans. People saw Hoover helping business – not the poor, unemployed masses.

Bonus Army May 1932 – WWI veterans promised a $1000 bonus by Congress to be paid in 1945 Marched to Washington to ask for promised money – set up camp along the Potomac River

Pres. Hoover ordered Army Chief of Staff Douglas MacArthur , aide Dwight Eisenhower, and the National Guard (George Patton) to rout (force out) the bonus army. Americans angered – camps burned and tear gas used on veterans Pres. Hoover seen as “out of touch” with ordinary Americans – will cost him in 1932 election.

SUMMARIZE This provided food for people if you were patient to wait. This was the cardboard/metal shacks the poor lived in some cities regions. Vocab term – give aid to the needy Who was president during the start of the Depression? What program provided money to businesses and state/local aid? What name was given to WWI veterans asking for an early payment for serving in the war? Who led the army against the WWI veterans asking for money? What vocab term means to force out?