ENTRY #38 (2/26/13) Using what you learned in the film, the First and Second Sections of Chapter 17 and A SINGLE PARTNER, Create a flow chart for the events of the Great Depression starting with the many causes of the stock market crash. (We will keep adding to this flow chart, so keep it handy!) CAUSES  OCTOBER 29, 1929  ______  _______ ______.... ________ (STOCKMKT CRASH) ________

CAUSES The Great Depression Uneven distribution of wealth Weak Farm Economy Easy credit and stock market speculation Imbalance in Foreign trade Overproduction of Consumer Goods

Uneven Distribution of Wealth In the 1920s wealth was unevenly distributed. 70% of American families in 1929 lived off of $2500/yr. Top 2% owned 60% of American Wealth Wealthiest 1% earned as much as the bottom 42% total… So What?: the wealthiest 1% couldn’t buy enough consumer goods to keep the economic boom going

Uneven distribution of wealth

Farmers had even bigger problems In the 1920s, facing plummeting farm prices, farmers continuously had trouble making ends meet. After WW1 prices dropped, and farmers couldn’t pay their loans and started to lose their farms

EASY CREDIT Installment buying – put down a down payment of a fraction of the cost, then pay back the principle monthly - allowed people to buy/live beyond their means. 3 out of 5 cars on credit 4 out of 5 radios on credit People even bought stocks on margin, borrowing most of the cost of stocks and making down payments as low as 10%. Investors then depended on the price of stock going up so that they could repay the loans

Mechanization New Machines helped plants turn out more products with less workers, creating a surplus of goods. Wages did NOT continue to rise throughout the 1920’s

IMBALANCE OF FOREIGN TRADE Tariffs of the 1920’s were the highest in history. More unemployed in Europe could not afford to buy American products (like foodstuffs) because they could not sell their own goods in America due to tariff. Decline in European economy made it impossible for them to repay debts to America and American businesses.

THE GREAT CRASH In 1928 stock prices soared to an all time high and continued Gains were speculative: Stock prices did not represent the real value of corporations After reaching an all-time high on Sept.3, on Black Thursday, Oct 24, 1929, the plunge started. Bankers tried a quick fix, but by Black Tuesday, the 29th (the worst day of the crash) stocks had their largest plunge as millions of investors ordered their brokers to sell, but nobody was buying, and the bottom dropped out of the market. Stock prices free-fell for three years, hitting a low at less than 1/9 of peak value.

Banks Closed In a panic to get their cash out of the failing banks, investors demanded their money, causing banks to fail. 1929: 641 banks failed 1930: 1,300 banks failed 1931: 17,000 banks failed When a bank fails everyone with money in the bank loses their cash and savings.

UNEMPLOYMENT By 1932 1 in 4 Americans had lost their job. By 1933, the number of Unemployed had reached 13 million, or 25% of the workforce, NOT including farmers! Americans that did not lose their jobs took pay cuts and hour cuts.

ENVIRONMENTAL DAMAGE During WWI, Great Plains’ farming had increased tremendously to meet wartime demand The nation’s economic problems of the 1930s were made worse by environmental problems associated with the unsound farming practices employed to meet wartime needs: Torn up top soil, laid barren in non-growing months, coupled with extreme droughts, caused “black blizzards” Dust storms killed crops and livestock, and destroyed property. Hardest hit: The Dust Bowl (region of Kansas, Oklahoma, Texas, N.Mexico, and Colorado)

FEDERAL GOV'T Although not to blame, bad decisions were made. Money supply had been increased too fast, creating an illusion of prosperity. Had cut interest rates too low to encourage economic growth. As a Republican, Hoover was laissez-faire &did not believe in a large federal government, but would soon be forced to take action. Hawley-Smoot Tariff of 1930 (highest in history) shut down foreign trade even further. President Herbert Hoover

Entry # 38 , Part 2 Actions Taken Create a graphic organizer illustrating the actions taken by Hoover’s Administration to improve the economy and add it to your Great Depression flowchart. Hawley-Smoot Tariff, 1930 Hoover Administration Brother, Can You Spare a Dime?

Actions Taken By Hoover Administration Reconstruction Finance Corporation (RFC), 1932 Hawley-Smoot Tariff, 1930 Hoover Administration Debt Moratorium, 1931 Federal Farm Board Volunteerism

Volunteerism Fails Hoover’s economic plan seemed sound: Cut Taxes, decrease interest rates (credit would be easier to get), and fund public works projects But also relied on: businesses to volunteer not to lay off workers or to cut pay or hours, taking a hit individuals to give to charities to help the poor. (too much) people acting against their own best interests.

Hoover’s RFC: Trickle Down Economics The Reconstruction Finance Corporation RFC was created in 1932. The RFC would loan money to banks, railroads, life insurance companies, etc... The idea was that by stabilizing these key businesses, the benefits would “trickle down” to smaller businesses and so on…bringing recovery.

Bonus Army In the desperate summer of 1932, WW1 Veterans (and their families) came to Washington, DC from across the country in order to demand early (13 years) the bonuses that they had been promised by Congress in 1924. Hoover told General MacArthur to “surround the affected area and clear it without delay”

Disgrace for Hoover MacArthur had his troops fix their bayonets and get their teargas ready. MacArthur drove the marchers out of Washington and then sets their camp on fire. How did this look?

Reconstruction Finance Corporation (RFC), 1932 Actions Taken These actions have a feeling of “Too Little, Too Late” and fail to cure the Depression. …Add in The Bonus Army March Incident in 1932… …and Hoover and the Republicans are doomed in the 1932 Election…Enter FDR. Reconstruction Finance Corporation (RFC), 1932 Hawley-Smoot Tariff, 1930 Hoover Administration Federal Farm Board, 1929 Debt Moratorium, 1931 Volunteerism