1. The Great Depression

2. Behind the Boom
NYSE soared from $4 billion in 1923 to $87 billion in 1929
Why were stocks rising?
Profits of corporations was rising – 1929 profits triple those of 1920
Banks and brokerage firms encouraged people to buy stocks on the margin
Allure of a “foolproof” method of getting rich

3. The Crash
October 24:
*Without warning investors start selling – prices are pushed down
GE – 315 per share to 283
Montgomery Ward – 83 per share to 50
“The fundamental business of this country…is on a sound and prosperous basis”
-Herbert Hoover

4. October 29 – Black Tuesday
A complete crash - $8 to 9 Billion lost in one day Stocks continued to plummet
Stockholders lost a combined $74 billion dollars
Equivalent to
$616 for every citizen
3 times what was spent on WWI
In a 1932 US Senate hearing Goldman Sachs testified that it sold its stock at 104 a share and the current price was 1 ¾

5. The Great Depression Unemployment Cessation of Growth Wages Plummet
*homebuilding came to a standstill
*residency construction fell by 90%
*85,000 businesses failed
*Remaining business production was halved
Wages Plummet
*National income fell from $80 to $50 billion
Economic Faith Questioned

6. “We have now passed the worst”
Political Paralysis
“We have now passed the worst”
President Hoover, 1930
What should the government do?
*balance the budget – Barnard Baruch
*tax, tax, tax – Barnard Baruch
*government economy – Nicholas Murray
*laissez faire – Andrew Mellon
*direct aid, relief, handouts
Read “A Nation in Distress”
Do you agree with Mellon’s approach? Which of the approaches do you think is most promising?

7. Hoover’s Commission Reconstruction Finance Corporation – 1932
Home Loan Act
Public Works Projects – Hoover Dam
Relief - $30 million in loans to states
“No one is actually starving, the hoboes, for example, are better fed then they have ever been.”
“Many persons left their jobs for the more profitable one of selling apples”
- Herbert Hoover
Read “A Nation in Distress”
Had Hoover realized the true extent of the Depression, do you think he would have acted differently?

8. Hoover’s Omission *Hoover’s rhetoric isolated him from Americans
*Voluntary actions and publics relations could not end the Depression
*Hoover placed too much confidence in his powers of persuasion
*Government Inaction
*Government Action
- Smoot Harley Tariff (1930)
- government decreased spending
- tax rate increased
- Federal Reserve Bank raised
interest rates

9. Behind the Crash 1. The economy was extremely vulnerable to a crash
“get rich philosophy”
-reckless business practices
-speculative ventures
Corporate Practices
-holding companies
-interlocking directorates
Banking Failures
-In the first 6 months of banks failed
-By 1932, 4,835 banks failed
-9 million savings accounts were lost

10. Behind the Crash 2. There was trouble on the farms
Average farmer’s income was 30% that of urban worker and was falling
By 1929, 40% of farmers were tenant farmers
68,000 foreclosures in 1926
In 1930, 150,000 lost their homes; 200,000 in 1931; 250,000 in 1932
From farm purchasing power fell by 60%
In reality, farmers had experienced serious economic trouble since the early 1920s

11. Percentage of Total Income
Behind the Crash
3. There was a serious misdistribution of income
Percentage of Total Income
Received by Top Groups
Top 1% Top 5%
80% of families had no savings
15,000 families received as much income as 5-6 million families combined
Brookings Institute - $2,000 for basic necessities, 60% of families received less than $2,000

12. The Depression’s Impact
Consult with a neighbor and assess the costs of the Depression, in an economic and political sense and a social capacity.
Economic/ Political Impact vs. Human Toll
Which of the two had a more profound impact on this nation?