Why did the Great Depression Happen?

Transcription

1 Why did the Great Depression Happen? 1920s 1930s What Happened? 1

2 Things were good during the 1920s Republican Presidents = Laissez faire economics = little to no regulation of businesses, low taxes Businesses grew! Production increased! People bought more stuff!...but there were some problems beneath the surface... 2

3 Indian Citizenship Act of 1924 The government passed this law making all Native Americans citizens rather than waiting 25 years as set forth by the Dawes Act. This was prompted by the service performed by Indians in World War 1. 3

4 1920s Economic Boom! High consumer spending buying lots of new products! How? Installment buying and easy credit (low interest rates)! 4

5 1920s Economic Boom! The new trend the stock market! Stock = share of a company. If the company does well, you make $$ off your share as the stock prices go up! Everyone wanted in on the stock market. Enter buying on margin paying a small % of the stock price up front and then paying the rest off. OK if the stock price rose, but if the stock price fell, the buyer still had to pay off the loan, but had no money to do so. Everybody was confident that the stock market would keep going up!! Will it??? 5

6 BENEATH ALL THE *FUN* AND WEALTH OF THE 1920s, THERE WERE SERIOUS PROBLEMS... 6

7 #1 Cause of the Great Depression Problems for Farmers During WWI Europe wanted American crops American farmers increased production and took out loans to buy more farm supplies Post WWI, Europe buys less American farmers still make as much; also use techniques that hurt land and will cause the Dust Bowl later. Throughout the 1920s, farmers suffer. Farm families make an average of $273 a year, compared to $750 for the average American family. Farmers live largely on credit only a matter of time before they are in deep trouble. 7

8 #2 Cause of the Great Depression A Decline in Production Even though production was up in many industries, industries that were the most important to the economy were hurting. Railroads lost business to other forms of transportation Mining had competition from new forms of energy (hydroelectric, fuel oil, natural gas) Industries such as automobile, construction, and consumer goods weakened. Construction declined and affected lumber and furniture manufacturing industries. 8

9 #3 Cause of the Great Depression Uneven Distribution of Wealth Distribution of Wealth: huge gap between the rich and poor, middle class is practically non existent Workers were producing more, but not really making much more money. The very rich made a lot, but didn't buy enough stuff to make up for the rest of the people not being able to buy much. The overproduction of farmers and the underconsumption of workers hurt the business cycle Workers also used more and more credit to buy goods The wealthiest 1% earned the same amount of $$ as the bottom 42% combined. 9

10 #4 Cause of the Great Depression Over Speculation PROBLEM: Speculation (essentially gambling money you don't have on stock, in the hopes the market will keep climbing) Beginning in September, stock market begins to have trouble. By October, stock prices are plummeting. October 24th = Black Thursday, as investors begin to sell stock for cheap and pull out of the market October 29th, 1929 = Black Tuesday The Great Stock Market Crash Over 16 million shares of stock sold Over $30 billion dollars lost Entire fortunes were lost *Panicked crowds outside NY Stock Exchange on Black Tuesday. 10

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13 Depression Begins The Banks Collapse Banks do not actually keep all money deposited on hand they loan it out After the stock market crash, there was a bank "run" people panicked and rushed to withdraw their money The banks cannot keep up with this "bank run" and cannot give everyone their money. Over 9,000 banks close their doors and declare bankruptcy Over 9 million people lose their money. 13

14 Depression Begins Businesses Close and Unemployment Grows Collapse of stock market and reduced consumer spending hurts businesses (no one is buying anything!) Businesses limit production, cut wages, and fire people Ford Motors puts 75,000 people out of work by closing several factories As unemployment grows, people spend even less money and the economy gets even worse. By 1933, nearly 25% of American workers are unemployed. 14

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16 BELLWORK 1/10/11 16

17 Life During the Great Depression "Brother Can You Spare a Dime?" "They used to tell me I was building a dream And so I followed the mob. When there was earth to plow or guns to bear, I was always there, right on the job. They used to tell me I was building a dream With peace and glory ahead Why should I be standing in line, just waiting for bread? Once I built a railroad, I made it run, Made it race against time. Once I built a railroad, now it's done Brother, can you spare a dime?" 17

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19 Life During the Great Depression Teenagers Ride the Rails Damages Family Life Breadwinning men reacted in different ways some fought on, some committed suicide, some left their families Women looked for any way possible to help their families survive Children suffered quit school, teenagers began to ride the rails, looking for jobs 19

20 President Hoover's Response Fails Promoted rugged individualism Wanted people to take care of themselves rather than the government take of its people Tried to fix a big problem with a little Band Aid but he did try to fix it 1) Tried to get businesses to keep employees, wages and prices at stable levels (voluntarily, not by law) 2) Reduced taxes on people to encourage spending 3) Asked the wealthy to be more charitable 4) Believed in localism problems could be solved on a local level, so the federal government should not get too inolved none of this worked (too laissez faire) 20

21 Hoover Tries Harder...Too Little, Too Late? Worried by public s anti Hoover attitude, Hoover uses federal resources Reconstruction Finance Corporation (RFC) (1932) created to strengthen banks and businesses through government loans Trickle down economics=money given to the banks would trickle down to the regular people. Banks to businesses to employees. RFC and trickle down economics failed. One project did make a difference The Hoover Dam on the Colorado River gave jobs to the Southwest. Criticism grows some want radical change communists, socialists, fascists 21

22 The Bonus Army March on Washington (Nail in Hoover's Coffin) WWI veterans had been promised a bonus check to be paid in 1945 but the depression hit and they needed the money in 1932 Hoover vetoed a bill to give veterans their WWI bonus money early 20,000 marched to Washington and set up a Hooverville Hoover had General Douglas MacArthur remove veterans Were given one hour to pack up and get out Tear gas was used on stragglers An 11 month old died, an 8 year old boy was paralyzed, 2 were shot, many injured. Ruined Hoover's reputation! 22

23 Attachments Woody Guthrie's Dust Bowl Blues Teenagers Ride the Rails