1. The Crash

2. Terms to Remember Durable Goods: Soft Goods: Business Cycle: Economic Bubble:

3. Terms to Remember Durable Goods: Goods designed to last a long time, typically very expensive Soft Goods: Goods immediately consumed with limited life span Business Cycle: Typical fluctuations in the business activity of a country Economic Bubble: Trade in products with inflated values

4. The Business Cycle

5. The House Built on Sand 1920s economy very precarious Half living below the poverty rate Easy credit saw high personal debt loads Stock Market levels grossly inflated Volatile situation

6. Herbert Hoover Picture of an ideal president Self-made Man Noted Engineer Devoted life to charity at 40 Profound humanitarian Highly accomplished Secretary of Commerce

7. Rugged Individualism Old theme in the United States All should succeed on their own Government assistance minimal “Pull oneself up by one’s own bootstraps”

8. Warning Signs Predictors of recession ahead Housing starts falling Business inventories high Production and wholesale prices dropped Demand for crops dropped

9. Factors Leading to Depression Economic floor wiped out Inequality of income levels Easy Credit Foreign trade levels Mechanization All four combined to send the economy into a tailspin

10. The Trigger The Stock Market crashed in October 1929 Lost 11% of all value on 10/24 Lost 13% on 10/28 Lost 12% on 10/29 Stock Market did not recover until 1947

12. Economy sent reeling Unemployment rate soared Consumer sales plummeted Evictions mounted

13. Official Reaction Limited Mellon advised to let the economy liquidate The Crash drove out the bad Would lead to limited difficulty Economy would emerge healthier “Prosperity just around the corner”

15. Banking Crisis Banks began to fail in the fall of 1930 Farmers defaulted on loans Rippled throughout the economy Runs on banks

16. Mounting Discontent Millions unemployed Homelessness grew drastically Formation of “Hoovervilles” “Bonus Army” debacle

17. Volunteerism Hoover was slow to act Promoted “Volunteerism” Convince people to cooperate, not coerce Keep employment levels up Refuse to seek raises Did not work

18. Additional Steps Promoted higher tariffs (Smoot-Hawley) Mexican repatriation Reconstruction Finance Corporation Federal Home Loan Bank Act Too little, too late