The Great DepressionThe Great Depression

The Economic Collapse

American Prosperity & Optimismp y pThroughout the 20’s national income rose abo t 43%about 43%.Americans were feeling good about seeing h i h k i h dtheir paychecks going up, so they started

spending $ on luxury goods – esp. cars.Factory production increased due to improved technology, management methods, and to meet increased demand.By 1929 the stock market was at an all time yhigh.

Pres. Coolidge / Sec. of Treasury Mellon / Herbert Hoover

Economic Policies of 20s & 30sEconomic Policies of 20s & 30s

Coolidge (1923-1929) & Hoover (1929-1933)Coolidge (1923-1929) & Hoover (1929-1933)Followed “trickle-down” economics leading to pro business policiesto pro-business policies.Trickle-down = As businesses make $, they

i i h id j b d hreinvest in the economy, provide jobs, and the $ trickles down to the workersSo, with Mellon’s urging, taxes were cut on big business and people making over $60,000/year.

Uneven Distribution of WealthSome money was reinvested.

S j b dSome new jobs were created.More $ was dedicated to new facilities &

hi t d d th th lmachines to produce goods rather than people.Businessmen & the rich kept much of the money.

i.e. The rich got richerWorker’s wages were kept low.

i.e. The poor got poorerp g pThe gap between rich and poor grew larger.

Overproduction of Industrial Goods♦Causes♦Causes

Machines allowed more goods to be made in less timeless time.Advertising promised increased convenience & a higher standard of living.a higher standard of living.People bought more factories produced morePeople stopped buying factories stillPeople stopped buying factories still produced

http://www.livinghistoryfarm.org/farminginthe20s/machines_01.htm

Agricultural OverproductionAgricultural Overproduction

Farmers were encouraged to produce moreFarmers were encouraged to produce more during WWI.Technology led to mechanization increasedTechnology led to mechanization increased efficiency.E i h i f dEurope starts growing their own food.Farmers are still producing after World War 1 there is a surplus prices drop dramatically

#6 Easy CreditB i t k iBuying stock on margin

People were allowed to buy stock on margin or by only putting down a portionmargin, or by only putting down a portion of the purchase priceInvestors speculated which stocks would rise in price, bought large quantities, then sold for a higher price to people who saw that the stock was “selling”, then the personthat the stock was selling , then the person who bought would sell for an even higher price, etc.S k i b ifi i ll i fl dStock prices became artificially inflated with little correlation to the companies actual worth

Homes, Cars, Stores

Anglers “hooking” Americans

Americans Engaged in SpeculationSpeculation = investing in something with the hope of making a quick, large profitp g q g p

♦ First speculation was in real estate– California, then Florida ,– Then the Real Estate market crashed

Speculators turned to the Stock Market.Speculators turned to the Stock Market.♦ Stock prices increased throughout the 20’s, but

really took off in 1927 (“stock market mania”)y ( )When people realized stock was inflated, they began to sellI O t b f 1929 t k i h d♦ In October of 1929, stock prices crashed as everyone tried to sell at once

Banks PracticesBanks had loaned money to speculators whoBanks had loaned money to speculators, who had lost it in the stock market.This meant banks didn’t have the money peopleThis meant banks didn t have the money people had deposited.People who had deposited money in thosePeople who had deposited money in those banks panicked and tried to withdraw all of their money. (“Run” on the bank)Many banks had no money to give.People who hadn’t even played the stock p p ymarket lost all of their money because of speculation.Over 5000 banks failed between 1929-1932.

It’s a Wonderful Life (1946)

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AgricultureAs farm prices dropped, farmers began to produce more food to make up the moneyBought expensive machinery and fertilizersBought expensive machinery and fertilizers, often in debtAs they produced more, prices fell even furtherAs they produced more, prices fell even furtherIn the mid-30’s, a series of severe dust storms ruined crops and forced many farmers from their land (Dust Bowl)Many of the 1 million families who lost their farms mo ed est to find ork b t ere mostlfarms moved west to find work, but were mostly unsuccessfulMany of these were “Okies” or “Arkies” fromMany of these were Okies or Arkies from Oklahoma and Arkansas

Unemployed Man Pleading for WorkUnemployed Man Pleading for WorkBy 1932 unemployment was at 25% in the USA h f h i h i blAt the start of the Depression, those in trouble could expect no help from the governmentM l f th ti h d t bMany people of the time were ashamed to be unemployed, and would do whatever they could to find workfind work.Thousands of businesses had closed; those that hadn’t weren’t hiringhadn t weren t hiringMany unemployed men left their homes and families to try to find workySome of them never saw their families again

FoodFood

“Bread lines” were established to feed the hungryBread lines were established to feed the hungryMost who used them felt ashamed and degradedHundreds of thousands of people were forced toHundreds of thousands of people were forced to use bread lines to surviveThey were first established by private charitiesThey were first established by private charities, and later by government

“Hooverville”Hooverville

“Hoovervilles” sprung up throughout the 30’sHoovervilles sprung up throughout the 30 sPeople were made homeless by unemployment, low wages business and bank failureslow wages, business and bank failuresMany people believed that President Hoover did nothing to help them, and so named the homelessnothing to help them, and so named the homeless towns after him.Built of old crates, cardboard, tin; anything that , , ; y gcould be used for shelter

President Hoover responseHoover at first believed the Depression was not a serious problempTried to convince business to keep producing, they refusedAgainst government giving direct relief to peopleBelieved that private charities should give reliefCreated Reconstruction Finance Corporation(RFC) to make loans to banks and businessesB l l th D i tBecame less popular as the Depression went onBlamed by many for the Depression

FDR at campaign rally in 1932♦ Hoover ran for President in 1932 for the

Republicans♦ Franklin D Roosevelt was nominated by the♦ Franklin D. Roosevelt was nominated by the

Democrats♦ Roosevelt had been governor of NY, and had♦ Roosevelt had been governor of NY, and had

created a successful relief program there♦ Roosevelt promised “bold, persistent action” to

fight the Depression♦ He gained support from different types of people♦ Promised a “New Deal” for America♦ Loved to campaign, and was loved by the crowds

W th l ti 58% 42%♦ Won the election 58%-42%

Political Cartoon of Hoover and Roosevelt♦ FDR radiated charm and confidence♦ Optimistic, believed that he could solve the problems of

the Depression♦ Hoover was worn down by the Depression♦ Hoover wanted FDR to continue some of his policies, but

FDR refusedFDR refused♦ They barely spoke to one another on Inauguration Day

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By 1929 (Had we been OVER optimistic?)optimistic?)♦There were many signs of economic trouble.♦Workers’ wages stopped rising.♦Demand for goods began to drop, so

workers were being laid off.♦Many people relied on credit to buy things,

and ran up large debt.♦ Farm prices dropped, making life hard for

farmers (1/3 of Americans).♦ Stock prices began dropping.♦Americans living in poverty increased.