THE GREAT DEPRESSION

Industries in Trouble Key basic industries barely made profits Railroads, Textiles, and Steel Mining and Lumbering needed for war No longer needed People weren’t building houses (Housing starts) effect other business

Farmers need a lift Prices for agriculture rose during WWI Crop prices fell 40% after the war Farmers boosted production Over-saturated market = lower price Started selling farms due to faulting loans

Consumers Consumers have less money to spend Rising prices, stagnant wages, unbalanced distribution of income Living on Credit- “Buy now pay later” Hard to pay back loan with interest People stopped purchasing

Uneven distribution of income Rich got richer/Poor got poorer 1920-1929: Wealthiest 1%=75% of income Average = one outfit a year bought The flood of goods from the factories remained unsold

Dreams of Riches (Stock Market) Mid-Late 20’s = boom time for Stockholders (Bull Market) Value of New York stock exchange 1925= $27 billion September of 1929 =$87 billion Average stockholder tripled investment

Dreams of Riches…. Playing the Stock Market The thought was: Economy is strong! Some economists warned about its weaknesses Engagement of Speculation Buying on Margin If stocks decline-no way of paying back the loan

The Stock Market Crashes Early September: Stock prices peaked and then started to fall quickly Confidence started to waver Some investors quickly sold stocks By Oct 24: Panicked investors unloaded their stocks (Black Thursday)

Black Tuesday…Losing it all! October 29th: Bottom fell out of the market and the Nations confidence fell Stock holders frantically dumped shares before prices got lower $16.4 million dumped Early November: Investors lost $30 bil.

Financial Collapse Stock market crash signaled the beginning of The Great Depression Period from 1929-1940 Economy plummeted, unemployment skyrocketed Crash alone didn’t cause The Great Depression

Bank Failures Panicked people withdrew their money Problem: Banks invested in the stock market 1929: 600 banks closed By 1933: 11,000 of the 25,000 banks in America failed

Business Failures The nations output of goods (GDP) cut in half between 1929-1932 90,000 businesses went bankrupt Unemployment up from 3% in 1929 to 25% in 1933 (millions of jobs lost) Workers faced pay cuts and reduction of hours

Depression Worldwide Europe suffered through the 1920’s Recovering from the war Germany had to pay reparations America: No longer afford foreign goods which hurt European markets In turn: Difficult to sell farm products abroad

Hawley-Smoot Tariff Act Protect farmers and manufacturers from foreign competition Had opposite effect (discouraged trade) World trade fell 40%

Causes of the Great Depression Tariffs and War debt policies that cut down the market or American goods A crisis in the farm sector The availability of easy credit An unequal distribution of income

Hoover’s Philosophy Government’s chief function: Conflict managers (not controllers) “Rugged individualism” valued Opposed any form of welfare or direct relief to the needy

Hoover's Cautious Steps Asked labor leaders not to demand higher wages or strike Helped private charities generate contributions to the poor Everything continued to get worse

Too little, too late... Construction of a dam on the Colorado River Approved $700 million public works program Profit: Sell generated electricity Provided: Flood control

Critics of Hoover “Farm Holiday”: Refusing to work fields “Hoovervilles”: the name given to the shantytowns in the 30’s “Hoover Blankets”: Newspapers “Hoover Flags”: Empty inside out pockets