The Great Depression Main Idea Reading Focus In the late 1920s, an economic depression started in the United States and quickly spread around the globe, causing great hardship and creating ideal conditions for political unrest. Reading Focus What happened to the U.S. economy during the 1920s? How did the Depression spread throughout the United States? How did the Depression affect the world?

The U.S. Economy in the 1920s At War’s End Economic Growth U.S. world’s leading economic power at end of World War I Position stronger during 1920s End of decade, economy crashed Economic Growth American farms, factories supplied world with food, supplies to fight World War I Economy slowed briefly at war’s end Steady Growth Economy booming by 1921 Most growth in industry Auto manufacturing, consumer goods, radios, vacuum cleaners, washing machines 1920s Stock Market Overall value rose 400 percent Americans did not want to miss out on prosperity Increased investment drove stock prices higher

Hidden Problems Credit Stock market booming, but hidden problems affected economy New wealth not distributed evenly Richest 1 percent of population earned 19 percent of nation’s income Easy credit allowed increase in consumer goods spending Credit Credit, arrangement where purchaser borrows money from lender and agrees to pay it back over time At decade’s end many consumers reached limit of credit Could no longer afford to buy products that had kept U.S. economy expanding

The Stock Market Crash Fall of 1929 October 29 Market Crash Consumer spending slowed, sales suffered Many feared drop in stock prices Nervous investors began to sell off stocks October 29 Black Tuesday, 16 million shares of stock sold in one single day Few people wanted to buy stock, stock prices collapsed Investors who had borrowed to buy stocks forced to sell at loss Market Crash Stock market crash ruined many investors Banks that had lent money to investors were also in deep financial trouble Devastating blow dealt to American industry

What happened to the U.S. economy during the 1920s? Sequence What happened to the U.S. economy during the 1920s? Answer(s): The economy boomed; Americans bought goods and stock on credit; when consumer spending slowed, a stock sell-off began, resulting in the 1929 stock market crash.

The Depression Spreads American economy took severe downward dive after stock market crash Economic downturn became known as Great Depression Depression result of complex factors One factor, slowdown in industry; began before crash, worsened quickly after Great Depression As industry slowed, workers lost jobs One out of four unemployed by 1933 Joblessness, poverty reduced ability to buy food, goods, hurt industry even further Banks suffered when businesses, investors failed to pay off loans; many failed Industry Slows

The Depression Spreads Government Response President Herbert Hoover favored minimal government response to crisis Some thought depression was normal adjustment to overheated economy Hoover eventually took some actions, many felt too little too late Roosevelt Elected Franklin Delano Roosevelt elected president, 1932 Increased federal government’s role in lives of Americans Pushed forward New Deal, program to fight Great Depression New Deal Provided government spending to help start economic recovery Public works programs to provide jobs, government money for welfare, relief New regulations to reform, protect stock market, banking system

New Economic Theories Increased government spending supported by theories of British economist John Maynard Keynes Believed governments could limit, prevent economic downturns Governments should spend money Spending would help increase economic output Factories would hire workers to meet new demand Eventually workers would begin spending, depression would end Government spending did help U.S. economy, but depression lingered through 1930s

Identify Cause and Effect Explain the factors that led to the Great Depression. Answer(s): unequal distribution of wealth; buying stock and products on credit; spending slowed; stock market crashed; a slowdown in industry followed

The Worldwide Depression In 1929 America was one of the world’s leading importers and lenders of money, and created much of the world’s industrial output. Events affecting America’s economy would soon impact other countries. Some countries having difficulties before stock market crash European countries recovering from World War I Allied Powers in debt to U.S. Before the Crash High interest rates in Great Britain Decreased spending, high unemployment Germany’s reparations led to inflation, crippled economy World Woes Japan’s economic depression forced banks to close U.S. Great Depression latest in long series of economic crises Effects far worse Series of Crises

The Worldwide Depression A Slowdown in Trade President Hoover signed Smoot-Hawley Tariff Act, 1930 Act placed heavy taxes on imported goods Attempt to encourage Americans to buy U.S. made goods, products American goods would be cheaper than taxed imported goods New tariff led other countries to increase their tariffs on American goods World trade slowed to a standstill Loss of foreign trade crippled many nations’ economies Act Backfired Trade slowed, prices collapsed Price of Japanese silk dropped Silk major Japanese export, nearly 20 percent of farm income Decline of silk industry one example of collapsing markets worldwide Results

The Worldwide Depression The postwar era left many countries politically unstable. As the Depression continued, unrest grew worse. Instability in Great Britain and France led to formation of several new governments Extremist political groups gained strength Germany’s Nazi Party blamed Jews Italian dictator Benito Mussolini tightened his control of the nation Political Impact Widespread misery, hopelessness worldwide Ideal conditions for rise of leaders who promised to restore their nations to glory World in midst of troubled times Worse crisis lay ahead Economies Worsen, New Leaders Emerge

How did the Depression spread to the rest of the world? Summarize How did the Depression spread to the rest of the world? Answer(s): World trade slowed, ruining some foreign economies. War recovery and economic problems in Europe led to political unrest and changes in government.