The Stock Market Crash of 1929 & The Depression of the 1930’s

 The 1920’s had been a decade of “superficial prosperity”  Some Americans became very wealthy, but many either couldn’t afford new goods, or went deep into debt to get them.

 Many Americans became very rich by “playing” the stock market.  People bought stocks, then sold them once their value had gone up.

 Many Americans appeared wealthy because they owned so many consumer goods.  Banks loaned Americans a lot of money.  Many Americans didn’t make enough money to be able to pay back their debts.

- Main cause of America’s current recession: - Housing crisis - Main cause of the crash of 1929: - Stock crisis

 Gross Domestic Product: the value of all the goods/services produced by a country in the global market.

 On October 29 th, 1929, the stock market “crashed”.

 When the stock market crashed, people rushed to banks to get all of their money back.  The problem: banks had used people’s savings accounts for loans. The money was gone.  Countless Americans lost their entire life savings.  The Bank run - YouTube The Bank run - YouTube

 Unemployment rates rose from 3% to 25%  GDP declined by nearly 50%  By 1933, 11,000 of the nations 25,000 banks had failed  About 90,000 businesses went bankrupt

 Between , the price of a share of US Steel fell from $262 to $22. General Motors from $73 to $8.  William C. Durant, one of the founders of General Motors, lost his entire fortune and ended up running a bowling alley in Flint, Michigan.

 US Steel had employed 225,000 full time employees in By the end of 1932, it had zero full time employees.  In Detroit, 4,000 children stood in bread lines each day.  Throughout the country, the unemployed demonstrated for jobs and economic relief.

 Many Americans thought Hoover’s response inadequate and insensitive.  Hoover strongly opposed Federal intervention in the economy.  Hoover thought that depressions were a normal part of capitalism.

 In 1932, Hoover raised taxes in an attempt to balance the Federal budget.  This further reduced Americans’ purchasing power.

 By 1932, it seemed clear that the depression would not end on its own.  Hoover began to lend money to failing banks and businesses.

 Hoover refused to offer direct relief to the unemployed.  He believed this would do the unemployed a “disservice” and make them dependent upon the government.

 In 1932, Franklin D. Roosevelt defeated Herbert Hoover in the Presidential election.

 FDR promised Americans a “New Deal”  The “New Deal” was an abundance of Federal programs created to stimulate economic growth and help Americans find employment.

 In his “First 100” days in office, FDR created programs like the:  - Civilian Conservation Corps  - Agricultural Adjustment Act  - National Industrial Recovery Act

 Roosevelt’s three R’s:  1. Relief  2. Recovery  3. Reform  The New Deal was a social experiment.  Could the government intervene to fix a broken economy?

 The New Deal created many programs that are still around today:  Social Security: tax money put aside to fund the retirement of the elderly.  FDIC: Federal Deposit Insurance Corporation, the government insures private bank accounts.