1. The Roaring 20s and The Great Depression

2. Roaring 20s- What You Need to Know
Time of economic prosperity and massive inequality
Return (desperate) to political normalcy
Rise of manufactured goods and modern conveniences

3. Roaring 20s- What You Need to Know
Classical liberal economics
Resulted in a huge boom in Western economies
‘No reason for someone not to be rich’
People invested heavily in the stock market
Speculation was rampant
Banks loan money on as little as 10% down
This led to what we know as a ‘stock market bubble’

4. Why did the market crash?
Many people bought stocks on margin
At this time you could buy stocks on 10% down payment
1000$ in stocks for only 100$
Companies lied about their profits
Economies like ours go through natural “boom” and “bust” cycles
These cycles have happened throughout history and the economy had always recovered
Politicians believed in laissez faire—no control on businesses
Based on the belief that things would go back to normal
Stock market was not regulated by government

5. Stock Market Crash- October 24, 1929
Stock market had hit all time highs in both prices as well as sales
Rampant speculation in stocks
Panic started in the stock market
People started to sell their stocks
As the panic grew more and more people sold
This forced prices down this meant that more people panicked and sold
Banks who had invested in the market tried to recoup their losses
People tried to get their money out of banks and were unable to

6. Consequences of the Crash
Millions of people who never owned a single stock lost their jobs, farms and homes
The crash was a precipitating factor in a much wider, long term crisis known as the Great Depression
People lost faith in the government and the economy
The Depression lasted from 1929 to 1941 when America entered WWII
The Depression had a ripple effect that hurt the economies of other countries

7. The Great Depression

8. Causes of the Great Depression
Stock market crash and financial panic
Unequal distribution of wealth
Monetary policy
High Tariffs and war debts
Overproduction by industry and agriculture (led to crop failures)

9. Economic Indicators:

10. The economy was further handicapped by agricultural failures in the prairies
                                                            

11. The Dust Bowl
The Great Plains region: North and South Dakota, Nebraska, Colorado, Kansas Oklahoma and northern Texas
Farmers plow the plains, eliminating the protective layer of grass
Wheat replaces grass: tractors make it much easier
Severe drought
High winds
Layers of top soil blown away, leaving dunes of grit and sand

12. A Dust Storm in Eastern Colorado

13. A collage of newspaper headlines from the Dust Bowl

14. Franklin Roosevelt and the New Deal
Comes into power as the people in the USA felt that the government was not doing enough
Pre Roosevelt the plan was to allow the economy to recover (it always had before)
Underestimation of the severity of the depression
Roosevelt campaigned on the principle of a ‘new deal’ for the American people
In Roosevelt’s first 100 days in office he created a number of alphabet agencies to put people back to work
Government work programs
Contrary to capitalist principles

15. John Maynard Keynes
British economist who responded to the failure of the unrestricted economy during the Great Depression
Government needed to be more active in regulating the economy to whether the “boom” and “bust” cycles
Prime Pump the economy
In good times=increase taxes
In bad times= increase spending

16. Demand-Side Economics
Focused on large scale demand
Combination of consumption of goods, industry investment, government spending, exports
Use of fiscal policy, adjusting government spending and taxes to influence the economy

17. New Deal ( ):
Concerned with relief for the unemployed and getting people back to work
Emergency banking act
Federal government inspects the bank and sets rules for loans and insurance for depositors
Restores confidence in the banking system
Mortgage relief given to home owners as interest rates increase
Loan guarantees given to home purchasers
National Industry Recovery Act
Large public works programs
Government involvement in business and attempts to ensure that business compete fairly
Alphabet Agencies
Glass-Steagall Act

18. Second New Deal 1935: Aims at higher taxes for the rich
National labor Relations Act
Federal protection of the bargaining process
Fair employment standards

19. Results of the New Deal:
Government involvement turned to correct the shortcomings of the capitalism system
Social Security Act
Establishes
Pensions
Unemployment insurance
Welfare grants
Subsidies
Development of deficit spending

20. Conclusions:
Permanent expansion in the role of Government in the economy
Economic regulation
Resource development
Income maintenance
The New Deal by its self failed to stimulate economic recovery (this was done by WWII) this gave the government the tools to be able to get involved in the economy
Monetary supplies
Federal reserve policies
Increased understanding of its own activities
Taxation, borrowing, spending