The Great Depression and New Deal (1929 – 1941) The Causes of the Depression and the Great Crash

The Economy of the Late 1920’s

1. The Rich got Richer and the Poor became less Poor! 0.1% of Americans had incomes over $100,000 & they had over 34% of all savings accounts. 71% of families earned $2500/ yr. or less. Workers were 40% more productive, but paid only 8% better! 1% made $10,000 +/ yr.

2. Easy Credit Hides the Gap Between the Rich and Poor – temporarily! Buying on Time and Installment Plans allowed people to spend money they didn’t have and people lived beyond their means (radios, cars, appliances, etc.)! Personal Debt Skyrocketed during the 1920’s!

3. Speculation on Stocks in the Bull Market of the 1920’s! Easy Credit led to Buying on Margin – 10% - 50% per share of stock up front and borrow the rest at high interest! Very risky, but as long as prices rose it was win/ win for everyone! Brokers could call in margins anytime. Led to inflation of stock prices!

4. Overproduction Led to Layoffs! Overproduction caused many durable goods to stockpile in warehouses! The auto industry began to slump after 1925 and related industries suffered too. Massive layoffs of workers resulted! Banks were hurt too! Why?

5. Farmers Suffered Earlier and More Often During the 1920’s! Farm prices fell from lofty heights after WW I (1914 – 1918)! One-fourth of America’s workers were farmers! Farmers often had to overextend on credit to survive Rural Banks before the 1929 Crash! Farmers too overproduced!

Review – 5 Causes of the Depression! 1.The Gap Between the Rich and the Poor. 2.Easy Credit Led to Larger Amounts of Personal Debt. 3.Unregulated Stock Speculation! 4.Industrial Overproduction of Durable Goods. 5.Farmers Suffered First!

The Road to the Great Crash 1928 – Dow Jones Industrial Average – the avg. price of stock for major industries hit 191. Sept. 3, 1929 – All time high of 381 Points! The Bull Market had run its course. It fell gradually until Oct. 23, 1929 when it fell 21 Points in one hour. Black Thursday, Oct. 24, 1929 orders to sell by worried investors caused it to plummet!

Black Tuesday, Oct. 29, 1929! To stop the panic, a group of bankers pooled $ to start buying again, but by Monday, Oct. 28 th they were falling again. Black Tuesday – a record 16.4 million shares sold (compared to 6 million on a average day)! $30 Billion evaporated At first only the 4 million Americans who owned stock were affected; soon millions more!

The Impact of the Crash on Workers, Farmers, & Businesses Factories shut down leaving millions jobless - Ford Motor Co. left 75,000 out of work by Aug. 1931! 1932 –1 out of 4 Americans were unemployed! Business failures large and small put others out of work and slashed many incomes and hours of those able to keep their jobs.

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The Impact on Banks Bank failures went from rural to urban. 9 Million savings accounts vanished and runs on banks added to the problem! In 1931 alone– 1500 banks ran out of money! Federal Reserve – tightened the money supply – big mistake!

Section 2-5 The Depression Worsens By 1933 thousands of banks had closed and millions of American workers were unemployed. -Unemployed workers often stood at bread lines to receive free food or at soup kitchens where private charities gave a free meal to the poor. Social Effects -people could not eat properly so many developed health problems -family problems- men left families because they could no longer support them; people postponed weddings

Section 2-7 America’s Farmers As crop prices dropped in the 1920s, many American farmers left their fields unplowed - A terrible drought in the Great Plains, beginning in 1932, caused the region to become a “Dust Bowl.” -Many Midwestern farmers and Great Plains farmers lost their farms. -Many families moved west to California hoping to find a better life, but most still faced poverty and homelessness. “Okies”

Escaping the Depression Americans escaped the hardships of the Depression by going to the movies and listening to radio broadcasts. -Stories tended to be about overcoming hardships and achieving success. -Walt Disney produced the first feature-length animated film, Snow White and the Seven Dwarfs, in Other films, like The Wizard of Oz, Mr. Smith Goes to Washington, and Gone with the Wind, contained stories of triumph over adversity and visions of a better life.

Families gathered around the radio daily to hear news or listen to comedians like George Burns or a dramatic series like the Lone Ranger. -Melodramas, called soap operas, became very popular with housewives. -Soap operas received their name because makers of laundry soaps often sponsored them.

The Depression in Art Homeless and unemployed Americans were the subjects of art and literature during the 1930s. -Artists and writers tried to capture the real life drama of the Depression. -Thomas Hart Benton and Grant Wood emphasized traditional American values in their art.

“Migrant Mother” by Dorothea Lange

Hoover's reaction to the depression -many believed that he did not do enough to end the depression -He believed that if the government gave tax breaks to the rich that they would put the money back into the economy -He opposed direct relief by the government -Summer ( known as the "Bonus Army) 20,000 WW I veterans and their families came to Washington, D.C. to demand payment of their pension bonus early (instead of getting it in 1945)

-Hoover decided to use force to make them leave -sent in General Macarthur and he used the military -tear gas (killed one baby from it), guns, and tanks -veterans only had sticks, stones, and bricks Election of Republican Herbert Hoover Democrat Franklin Delano Roosevelt FDR won overwhelmingly.

EXIT SLIP 1. Name 2 causes of the Great Depression. 2. Name 3 results of the Depression. 3. What can you do to protect yourself from another economic depression?