1. The Great Depression & New Deal, 1929-1941 Unit 7: Causes of the Great Depression

2. Origins and Causes  Extreme wealth inequalities Big difference between rich and poor  Ballooning stock market Over speculation and buying stock on credit would lead to the Stock Market Crash (Black Thursday 10/29/1929)  Over reliance on unprotected loans We still had debt from WWI  Too much speculation & borrowing

3. Stock market Crash  1920's had been a period of good economic times  Tuesday Oct. 29th, 1929 - NYC Stock market crashed, causing a depression that would last until 1940

4. How the Stock Market Worked  the public invests in companies by purchasing stocks; in return for this they expect a profit  b/c of booming 1920's economy, profit was plentiful, so banks were quick to make loans to investors

5. Stock market  also investors only had to pay for 10% of the stock's actual value at time of purchase  this was known as BUYING ON MARGIN, and the balance was paid at a later date

6. Stock Market  this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck  because of all this buying & selling, stock value increased (Ex: G.E stock $130  $396/share)  this quick turnover didn't aid companies they needed long term investments so they could pay bills (stock value was like an illusion)

7. Inequality Causes a Ripple Effect  a major problem: uneven distribution of wealth 42% of the population was below poverty line Top 1% owned most of the $$  of the 58% above the poverty line, most fell into the middle class category - they were not wealthy; they had jobs b/c of the industrialization & consumerization of the American market place  this middle class depended on their salaries and when productivity declined they lost their jobs  and because of low savings, they had to cut back on their purchases this decline in purchases among the middle class ruined the whole country

8. President Hoover Herbert Hoover Was a Progressive Worked towards War Reconstruction  Opposed direct federal aid  Instead he believed in: Self-help & volunteerism Self-help cooperatives (this means the government did not think it was their job to help the people financially)

9. President Hoover’s Response  he didn't believe that the gov't should play an active role in the economy  he persuaded bankers/business to follow his policy of VOLUNTARY NON - COERCIVE COOPERATION where he gave tax breaks in return for private sector economic investment  Hoover also organized some private relief agencies for the unemployed Believed it was the Church's job to aid those in need not the Government

10. President Hoover’s Response  he worked out a system with European powers that owed U.S. money as a result of WWI debts = HOOVER MORATORIUM - put a temporary stop to war debt & reparations payments European countries were to purchase American goods instead to stimulate American economy

11. Good idea in theory…  in early 1931 these measures appeared successful, but then......the TARIFF WARS began  Democrats in Congress passed a high tariff (SMOOT HAWLEY) to protect U.S. industry (hoped to stimulate purchasing of U.S. goods) this turned out to be a fatal error... Congress did not understand that the world had become a GLOBAL ECONOMY  in retaliation other countries passed high tariffs and no foreign markets purchased American goods, so U.S. productivity decreased again

12. Hoovervilles

13. Seattle, 1931