The Great Depression 1929-1933
Causes Bank Failures Business Failures Unemployment Income & Spending Stock Market Speculation
Bank Failures Banks had invested in the Stock Market Couldn t get the money they invested in the stock market back after Black Tuesday. 600 closed 11,000 of 25,000 failed by 1933
Bank failures 4 3.5 3 2.5 2 1.5 1 0.5 0 1929 1931 1933 Bank Failures
Business Failures Key industries were barely making a profit -Railroads -Textiles -Steel -Mining -Lumbering -Coal Mining Boom industries of the 1920 s were weakening -automobiles -construction -consumer goods
Business failures 35 30 25 20 15 10 Business failures 5 0 1929 1931 1933
Business Failures Today
Trickle Down Effect New housing starts were down
Unemployment Trickle down effect would eventually effect employment.
Unemployment in the 1920 s 2,132,000 unemployed Unemployment 5.2% 14 12 10 8 6 unemployed 4 2 0 1928 1931
Unemployment today
Income & Spending Americans of the 1920 s were living on credit
Businesses were actually encouraging Americans to pile-up debt
Results of buying on credit Unfortunately many Americans had trouble paying off their growing debts.
Faced with debt, consumers cut back on spending
Businesses suffered The nation s economy also suffered Today:
Uneven Distribution of Income The rich got richer The poor got poorer 75% 9%
Annual Income 70% of nation s families $2,500/year ($2,500 was considered the poverty line) Today:
Consumer Spending Some families earning 2X more than $2,500 could not afford household goods being produced Result: many products went unpurchased Businesses were left with unsold products
Stock Market Speculation People were engaging in speculation Bought stocks and bonds on the chance of a quick profit Many ignoring the risk
The Reality of the Stock Market Buying on margin-buying on credit Paying only a down payment for the stocks you wanted and borrowing the rest If stock price fell many could not pay the outstanding amount owed
Today Typical Stock
BLACK TUESDAY
October 29, 1929- stock prices fell and investors raced to get their money out of the market Many were unsuccessful at getting out without huge losses Some investors lost their life savings
Worldwide Effects Europe gripped by Depression also Europeans can t pay back their American debts (Germany) Europeans can t buy American farm products or consumer goods Americans are forced to place high taxes on imported goods (Hawley-Smoot Tarrif)
Hoover struggles with the Depression Hoover believed that Americans could help themselves through the Depression Rugged individualism -people should succeed through their own efforts
Cautious Steps Any lack of confidence in the economic future is foolish. -Herbert Hoover brought together key leaders in business, banking, and industry to find solutions to economic problems
Employers Asked to NOT lower wages Asked to NOT lay-off workers
Labor Unions Asked to NOT Demand Higher wages Asked to NOT go on strike
Charities Hoover created an organization to help private charities generate contributions for the poor
Results of Hoover s Cautiousness Shanty Towns-(Hooverville) Shrinking economy High unemployment (and rising) Business and Bank failures Soup kitchens and bread lines more common Hoboes continued to roam the nation
Projects approved by Hoover Boulder Dam-generates electricity and provides water for cities like Las Vegas and Los Angeles
Mellon pulled the whistle Hoover rang the bell Wall Street gave the signal And the country went to hell.
Hoover forced to action Depression deepens
Hoover s programs Federal Farm Board-organization of farm cooperatives -raise crop prices National Credit Corporation-loaned money to banks -to stave off bankruptcy
More Hoover programs Federal Home Loan Bank Actlowered mortgages and allowed farmers to refinance -fewer foreclosures Glass-Steagall Banking Act- Separated investment banking and commercial banking -to prevent another crash
Still More Hoover programs Reconstruction Finance Corporationemergency financing for banks, life insurance companies, railroads, and other large businesses ($2 billion) -trickle down to average citizens through job growth and higher wages
Indirect Intervention by Hoover Hoover encouraged cities and charitable organizations to have: Bread lines Soup lines Direct relief
Footnote or Endnote (1) G. Wayne Miller, King of Hearts: The True Story of the Maverick Who Pioneered Open Heart Surgery (New York: Times, 2000) 245
Bibliography Miller, G. Wayne. King of Hearts: The True Story of the Maverick Who Pioneered Open Heart Surgery. New York: Times, 2000.
Comparing Footnotes/Endnotes and a Bibliography (1) G. Wayne Miller, King of Hearts: The True Story of the Maverick Who Pioneered Open Heart Surgery (New York: Times, 2000) 245. Miller, G. Wayne. King of Hearts: The True Story of the Maverick Who Pioneered Open Heart Surgery. New York: Times, 2000.