The 1920s were a decade of consumer spending and the economy looked healthy on the surface Income did increase in the 1920s, but there were severe problems with the U.S. economy In October 1929, the “Roaring Twenties” came to an end and the Great Depression began…why?

Group Activity: What caused the Great Depression? In rows, determine what factors contributed to the Great Depression: Examine the documents provided and complete the chart in your notes by defining the term, explaining how it contributed to the depression. After examining all documents, 1) predict what could have been done to slow, halted, or reversed the depression; 2) RANK the causes from the most significant to lease. Lastly, When finished, create a one sentence thesis that explains why the depression began…be prepared to discuss

Causes of the Great Depression: A Distribution of Wealth in the 1920s * An income of $2,500 per year was considered the minimum amount needed for a decent standard of living This image relates to “Distribution of Income”

Causes of the Great Depression: B This image relates to “Bank Failures”

Causes of the Great Depression: C Year the depression began This image relates to “Stock Market Crash” and “Margin Buying”

Causes of the Great Depression: D This image relates to “Depressed Agriculture ” Year the depression began

Causes of the Great Depression: E Stock sold after increase in value Benefits and risks of buying a $1,000 stock “on margin” from a broker Stock bought “on margin” Stock sold after decrease in value This image relates to “Weak Industries”

Causes of the Great Depression: F This image relates to “Credit” Year the depression began

Over-production and under-consumption By the end of the 1920s, factories produced too many durable goods (known as over-production) People did not need as many appliances and cars by the end of the decade (under-consumption) Too much inventory… Not enough buyers

Problems for farmers and industry Railroads, textiles, coal were losing money and faced competition from cars, synthetic fabrics, natural gas. During WWI, prices rose and international demand for crops such as wheat and corn soared. The end of WWI led to a decline in demand for agricultural products and a 40% decline in crop prices Farmers boosted production. Farmers could not pay back loans and many had their farms foreclosed. Rural banks also began to fail. Congress tried to help farmers out by implementing price-supports (The government would buy surplus crops at guaranteed prices and sell them on the world market. but Pres. Coolidge vetoed the bill. End of WWI

Increasing American debts Many Americans used credit to live beyond their means. This was often in the form of an installment plan (usually in monthly payments) that included interest charges. Americans generated large debts, and had to cut back on spending by the end of the decade.

Uneven distribution of wealth The decade was not as wealthy as it appeared; Despite rising wages, the gap between the rich and poor grew wider in the 1920s. Wealthiest 1% of population rose by 75%, compared to 9% increase as a whole for all Americans. 70% of Americans were considered “poor” (earned less than 2,500 year) so most of the spending was done by 30% of the population Economists estimate that the average man or woman bought a new outfit of clothes only once a year. Scarcely half the homes in many cities had electric lights or a furnace for heat. Only one city home in ten had an electric refrigerator. This unequal distribution of income meant that most Americans could not participate fully in the economic advances of the 1920s. * An income of $2,500 per year was the minimum amount for a decent standard of living

If value of stock declined, borrowers had no way to pay off stock. Stock market People were engaging in speculation—that is, they bought stocks and bonds on the chance of a quick profit, while ignoring the risks The stock market soared throughout the 1920s and people speculated by buying on margin. (paying a small percentage of a stock’s price as a down payment and borrowing the rest). The stock market was not regulated which allowed some companies to alter their stock values to increase profits… This created a “bubble” in the stock market. If value of stock declined, borrowers had no way to pay off stock. By 1929, some economists had warned of weaknesses in the economy, but most Americans maintained the utmost confidence in the nation’s economic health. In increasing numbers, those who could afford to invested in the stock market. The stock market had become the most visible symbol of a prosperous American economy. Then, as now, the Dow Jones Industrial Average was the most widely used barometer of the stock market’s health. The Dow is a measure based on the stock prices of 30 representative large firms trading on the New York Stock Exchange. Through most of the 1920s, stock prices rose steadily. The Dow had reached a high of 381 points, nearly 300 points higher than it had been five years earlier. Eager to take advantage of this “bull market”—a period of rising stock prices— Americans rushed to buy stocks and bonds. One observer wrote, “It seemed as if all economic law had been suspended and a new era opened up in which success and prosperity could be had without knowledge or industry.” By 1929, about 4 million Americans—or 3 percent of the nation’s population—owned stocks. Many of these investors were already wealthy, but others were average Americans who hoped to strike it rich. However, the seeds of trouble were taking root. People were engaging in speculation—that is, they bought stocks and bonds on the chance of a quick profit, while ignoring the risks. Many began buying on margin—paying a small percentage of a stock’s price as a down payment and borrowing the rest. With easy money available to investors, the unrestrained buying and selling fueled the market’s upward spiral. The government did little to discourage such buying or to regulate the market. In reality, these rising prices did not reflect companies’ worth. Worse, if the value of stocks declined, people who had bought on margin had no way to pay off the loans

Speculators who bought on the margin, could not pay off their debts The spark the triggered the Great Depression was the stock market crash in October 1929 On October 29, 1929 (Black Tuesday) the stock market crashed . Black Tuesday—the bottom fell out of the market and the nation’s confidence. People rushed to sell, stock prices dropped, and investors lost a total of $30 billion By 1929, some economists had warned of weaknesses in the economy, but most Americans maintained the utmost confidence in the nation’s economic health. In increasing numbers, those who could afford to invested in the stock market. The stock market had become the most visible symbol of a prosperous American economy. Then, as now, the Dow Jones Industrial Average was the most widely used barometer of the stock market’s health. The Dow is a measure based on the stock prices of 30 representative large firms trading on the New York Stock Exchange. Through most of the 1920s, stock prices rose steadily. The Dow had reached a high of 381 points, nearly 300 points higher than it had been five years earlier. Eager to take advantage of this “bull market”—a period of rising stock prices— Americans rushed to buy stocks and bonds. One observer wrote, “It seemed as if all economic law had been suspended and a new era opened up in which success and prosperity could be had without knowledge or industry.” By 1929, about 4 million Americans—or 3 percent of the nation’s population—owned stocks. Many of these investors were already wealthy, but others were average Americans who hoped to strike it rich. However, the seeds of trouble were taking root. People were engaging in speculation—that is, they bought stocks and bonds on the chance of a quick profit, while ignoring the risks. Many began buying on margin—paying a small percentage of a stock’s price as a down payment and borrowing the rest. With easy money available to investors, the unrestrained buying and selling fueled the market’s upward spiral. The government did little to discourage such buying or to regulate the market. In reality, these rising prices did not reflect companies’ worth. Worse, if the value of stocks declined, people who had bought on margin had no way to pay off the loans Speculators who bought on the margin, could not pay off their debts

After the crash, people tried to withdraw their money from banks When banks could not produce money for all their customers, (b/c they invested in the stock market) the banks failed This led to a run on banks across the U.S… hundreds of banks failed (In 1929, 600 banks closed. By 1933, 11,000 of the nation’s 25,000 banks had failed) and thousands of people lost their savings The Stock Market Crashes In early September 1929, stock prices peaked and then fell. Confidence in the market started to waver, and some investors quickly sold their stocks and pulled out. On October 24, the market took a plunge. Panicked investors unloaded their shares. But the worst was yet to come. BLACK TUESDAY On October 29—now known as Black Tuesday—the bottom fell out of the market and the nation’s confidence. Shareholders frantically tried to sell before prices plunged even lower. The number of shares dumped that day was a record 16.4 million. Additional millions of shares could not find buyers. People who had bought stocks on credit were stuck with huge debts as the prices plummeted, while others lost most of their savings. By mid-November, investors had lost about $30 billion, an amount equal to how much America spent in World War I. The stock market bubble had finally burst. The banking failure and stock market crash led to the collapse of thousands of businesses

The Great Depression led to a global depression in Europe, Asia, and Latin America World trade fell by 40% To encourage citizens to buy from U.S. companies (not foreign competitors) the government passed new high tariffs… …European nations responded with their own tariffs which made it difficult for U.S. companies to sell their goods overseas

From 1929 to 1932, unemployment grew to 12 million people When the Great Depression began, millions of people lost their jobs or took pay cuts to keep their jobs From 1929 to 1932, unemployment grew to 12 million people Americans lacked confidence in the future so they tried not to spend money Financial Collapse The stock market crash signaled the beginning of the Great Depression—the period from 1929 to 1940 in which the economy plummeted and unemployment skyrocketed. The crash alone did not cause the Great Depression, but it hastened the collapse of the economy and made the depression more severe. BANK AND BUSINESS FAILURES After the crash, many people panicked and withdrew their money from banks. But some couldn’t get their money because the banks had invested it in the stock market. In 1929, 600 banks closed. By 1933, 11,000 of the nation’s 25,000 banks had failed. Because the government did not protect or insure bank accounts, millions of people lost their savings accounts. The Great Depression hit other businesses, too. Between 1929 and 1932, the gross national product—the nation’s total output of goods and services—was cut nearly in half, from $104 billion to $59 billion. Approximately 90,000 businesses went bankrupt. Among these failed enterprises were once-prosperous automobile and railroad companies. As the economy plunged into a tailspin, millions of workers lost their jobs. Unemployment leaped from 3 percent (1.6 million workers) in 1929 to 25 percent (13 million workers) in 1933. One out of every four workers was out of a job. Those who kept their jobs faced pay cuts and reduced hours. The decline in consumer confidence made the depression drag on until the 1940s

The Great Depression led to a collapse of the American financial system by 1933 Americans lost confidence in banks as 25,000 banks failed; The lack of banking meant there was no money for investment The lack of spending and stock market crash led to failure of 90,000 businesses Unemployment peaked at 25% of all Americans; People lost their homes, farms, and businesses The USA had record poverty and suicide rates and healthcare declined; Charities offered soup kitchens and breadlines to help

The Dust Bowl From 1930 – 36, a terrible drought, coupled with decades of damage to the topsoil from plowing, led to wind erosion and huge dust clouds Thousands of farmers lost everything and were forced to move west and work as migrant farmers

The effects of the depression were made worse by the Dust Bowl Decades of over-farming and droughts in the Plains led to windstorms that swept away soil and made farming impossible

Farmers in the Plains (called “Okies” and “Arkies” left their farms and searched for work or for better land in West coast states Financial Collapse The stock market crash signaled the beginning of the Great Depression—the period from 1929 to 1940 in which the economy plummeted and unemployment skyrocketed. The crash alone did not cause the Great Depression, but it hastened the collapse of the economy and made the depression more severe. BANK AND BUSINESS FAILURES After the crash, many people panicked and withdrew their money from banks. But some couldn’t get their money because the banks had invested it in the stock market. In 1929, 600 banks closed. By 1933, 11,000 of the nation’s 25,000 banks had failed. Because the government did not protect or insure bank accounts, millions of people lost their savings accounts. The Great Depression hit other businesses, too. Between 1929 and 1932, the gross national product—the nation’s total output of goods and services—was cut nearly in half, from $104 billion to $59 billion. Approximately 90,000 businesses went bankrupt. Among these failed enterprises were once-prosperous automobile and railroad companies. As the economy plunged into a tailspin, millions of workers lost their jobs. Unemployment leaped from 3 percent (1.6 million workers) in 1929 to 25 percent (13 million workers) in 1933. One out of every four workers was out of a job. Those who kept their jobs faced pay cuts and reduced hours.

Hoover private charities to help (“volunteerism”) When the Great Depression began, Republican President Herbert Hoover tried to solve America’s economic problems President Hoover believed that America could overcome the depression through “rugged individualism” (using hard work and perseverance) Rugged Individualism- that local organizations and charities should provide direct relief Hoover private charities to help (“volunteerism”) He encouraged business growth, wanted to keep taxes low, and avoided direct gov’t intervention Woody Guthrie

National Credit Corporation Hoover tried to ease the nation’s credit crisis with the creation of the NCC The NCC held a pool of private money that it could lend to banks so that banks could continue to offer loans; the NCC, however, never had enough cash to meet the demand and so was a failure

Under Hoover, the gov’t issued relief checks to help the unemployed As the depression worsened, Hoover called for more direct government action to ease peoples’ suffering Under Hoover, the gov’t issued relief checks to help the unemployed Congress created the Reconstruction Finance Corps (RFC) to loan money to save failing businesses When the NCC failed, Hoover resorted to government lending The RFC was created to make direct loans to banks & railroads Even the RFC could not meet the demands for loans, and the economy continued to fail

Congress approved new building projects ( Emergency Releif & Construction Act) to put Americans to work like the Hoover Dam One of Hoover major efforts to address the economic crisis was the 1930 Federal Farm Board. Did not work.

Hawley-Smoot Tariff Designed to help famers, it was expanded to include large number of consumer goods established the highest protective tariff in United States history. When European nations responded with tariff on American goods, international trade dropped dramatically. BY 1934 trade was down two-thirds from its level in 1929

Hunger Marches Crowds of the unemployed and hungry began to hold large-scale demonstrations across the US The largest was organized by the American Communist Party in Washington DC; protesters chanting “Feed the hungry, tax the rich” were blocked from marching by the police

Farmers Revolt Meanwhile, desperate farmers began to destroy their crops and produce in an effort to increase prices Some even resorted to burning their crops for heat in their home Anger continued to grow as more and more farmers had their land foreclosed on by banks

Breadlines & Soup Kitchens As unemployment approached 30%, many people began to rely heavily on soup kitchens and breadlines run by churches, charitable organizations, & some city governments in order to survive

Hobos Hundreds of thousands of homeless, jobless men began to live a nomadic lifestyle, moving from place to place usually by illegally hiding on freight trains Often lived in temporary Hoovervilles called “hobo jungles” along the railroad tracks

Hoovervilles In large cities, as people could no longer afford to pay rent, they were forced into homelessness Many began to live in homemade shacks that they built in any open space available – whole villages of such shacks began to appear, mockingly referred to as “Hoovervilles”

The Bonus Army In 1924, Congress had promised to pay every WWI veteran a $1000 bonus in 1945 May 1932 – over 15,000 vets arrived in DC to lobby Congress to move the bonuses up – Congress voted against the idea

Hoover Responds to the Bonus Army After the vote, much of the Bonus Army remained in Washington, living in Hoovervilles and vacant buildings Pres. Hoover ordered them dispersed; after the DC police failed, Hoover sent in US Army, who used tear gas and bayonets to clear the Bonus Army out

These efforts did not end the depression and many citizens lost faith in President Hoover

Americans who lost their homes, lived in shantytowns nicknamed “Hoovervilles” “Hoover Hotels” “Hoover Blankets” “Hooverville”

By the election of 1932, Americans were looking for new leadership and a president who could save them from the Great Depression Republicans nominated Hoover, while Democrats ran NY Gov. Franklin Delano Roosevelt Hoover continued his mantra that recovery was just around the corner, while Roosevelt pledged himself to a “new deal” for the American people Roosevelt won easily

Franklin Delano Roosevelt 1882 – 1945 32nd President (1933-45) President throughout most of the Great Depression and WWII Roosevelt had been paralyzed from the waist down from polio since 1921, making him our only physically disabled president, however, he carefully controlled his public appearances so that the public wasn’t constantly reminded of his disability

Creating a Plan to Get America out of the Depression Although historians and economists differ on the main causes of the Great Depression, most cite a common set of factors, among them: 1) tariffs and war debt policies that cut down the foreign market for American goods 2) a crisis in the farm sector 3) the availability of easy credit 4) an unequal distribution of income 5) Bank failures 6) Stock market speculation and buying on margin These factors led to falling demand for consumer goods, even as newly mechanized factories produced more products. The federal government contributed to the crisis by keeping interest rates low, thereby allowing companies and individuals to borrow easily and build up large debts. At first people found it hard to believe that economic disaster had struck. In November 1929, President Hoover encouraged Americans to remain confident about the economy. Yet, the most severe depression in American history was well on its way.

Group Activity: Saving the Future! Get Us Out of the Depression With a partner, you will play the role of an economist/advisor for future president FDR. Your job is to help provide him a plan to get the economy out of the depression so he can win the election. You will have to give him the pros and cons of the plan so he can evaluate which plan to choose. Your plan should include the following steps: Step #1- Identify the goal and what is the problems. Step #2- Brainstorm 6-9 ways to fix the problems. Step #3- Pick 2 plans out of step #2, give the plans a name, and list the Pro’s and Con’s of each plan.