Post on 12-Apr-2017
THE GREAT DEPRESSION 1930S
BY MANISH SHIVALE EMAIL ID : MANISHSHIVALEROCKSTAR@GMAIL.COM
OCTOBER 24 , 1929
• New fangled technology , like the radio (R.C.A) and the car ( ford started mass production) coupled with real state speculation created an economic temperament of
SPECULATION: Too many Americans were engaged in speculation- buying stocks and bonds hoping for a quick profit.
“GET RICH QUICK”
MARGIN: Americans were buying “on margin”-paying a small percentage of a stock’s price as a down payment and borrowing the rest.
If a stock is $100 you can pay $10 now and
the rest later when the stock rose
4 million Americans owing stocks
: farmers could not pay back the loans they took out during WWI due to an decrease in the prices of agricultural goods (econ. historians view this as a reason that contributed to the banking panics)
FARMS DEBT
: In an attempt to regulate/ limit stock market speculation, a tight monetary policy was implemented in the Summer of 1929.
The Federal Reserve raised interest rates to slow the rise in stock prices in 1928 and 1929
GOVERNMENT POLICIES
Consequently, consumer demand fell as higher interest rates depressed interest-sensitive spending/investment, such as auto purchases as well as construction causing an oversupply
Excess supply led to a drop in prices, which led to a drop in production
It also transmitted to other countries as high interest rates decreased lending to foreign nations, which caused their output to drop
• Black Thursday ( october 24) - a record 12,894,650 shares traded.• Black Friday- investment companies and leading
bankers attempted to stabilize the market by buying up great blocks of stock.• Black Monday- market went into free fall.
1929 STOCK MARKET CRASH
OCTOBER 24,1929
BLACK TUESDAY
16 million shares traded
Record not broken for
nearly 40 years
Market had lost over $30 billion
• Private construction virtually ceases.• Mills and factories shut down.• Railroads come to a virtually standstill.• Millions of Americans –men ,women,
children- wait in the cold on the breadlines in soup kitchens.
DEPRESSION BEGINS
NO ABILITY TO EARNNO ABILITY TO REPAYNO ABILITY TO SPEND
NO ABILITY TO CONSUME
• Due to pessimism about the future, people wanted currency so they rushed to the banks and demanded their deposits in Fall of 1930, Spring and Fall of1931, and Fall of 1932 &33
• Many banks found themselves short of funds because they could not liquidate loans
BANKING PANICS
• Response: FDR declared a national “bank holiday” on March 9, 1933 that closed down banks until deemed solvent
Around 9,000 banks failed• Such panics reduced the money supply
• 13 million people became unemployed.• In 1932, 34 million people belonged to
families with no regular full-time wage earner.
• The income of the average American family was reduced by 40%.
HIGH UNEMPLOYMENT
• 2 million homeless people migration around the country.• Over 60% of Americans were categorized
as poor by the federal government in 1933.
HIGH MIGRATIONS
• Some families were forced to live in shanty towns• A grouping of shacks and tents in vacant lots
• They were referred to as “Hooverville” because of President Hoover’s lack of help during the depression
• Poverty and crime spread throughout US.
• Finally , In 1936
J.M KEYNESTHE GENERAL THEORY OF
EMPLOYMENT, INTEREST AND MONEY
onHOW TO FIGHT THE DEPRESSION
• In good times, government should reduce their spending and build surpluses. In bad times like in
depression they should step up spending, run deficits and put
purchasing power into the hands of working people.
• Keynes idea began to gain ground.
• US government borrowed money and pumped it into the war effort, high employment ended and the DEPRESSION DISAPPEARED.
WORLD WAR 2, 1941
RECOVERY BEGINS
• Men and women to make the uniform.• Machinists to make the gun and
ammunition.• Auto workers to produce the jeeps
trucks ,to build the ships and tanks.• Civilians soldiers to turn out the fighters
and soldiers.
• Keynes expressed his hope:
What worked in war, would work in
peace
THANK YOU