THE GREAT DEPRESSION: IT BEGINS

ESSENTIAL QUESTIONS

How did the economic, political and cultural choices in the U.S. contribute to the Great Depression?

How did/has the Great Depression affect(ed) our world, both in the past and the present?

FOCUS QUESTIONS

What caused the Great Depression?

Could it have been avoided? How? Why not?

Can we avoid it in the future?

BACKGROUND/REVIEW

1920s – consumption goes up, GNP goes up, stock market goes up

1928 – Hoover nominated by Republicans-emphasized competition, but voluntary cooperation between labor and management

- Democrats nominate Alfred E. Smith (1st Catholic)

We know prosperity was mostly in suburbs – upper/middle class; farmers and poor see little of the ‘Roaring ‘20s’

Farmers had increased harvest to meet WWI demands-bought land and equip – often going into debt-War ends – demand for crops ends – prices fall-Mother Nature also a factor-lived on credit from month to month – similar to sharecropping

INCREASING DEBT (GOOD OR BAD?)

Increasing debt of Americas – doubled over decade (3 billion to over 6 billion)

Uneven distribution of wealth-between 1923-1929 output/person jumped 32%, wages only 8%; corporate profits up 65%-rich became richer, worker less poor-1929 wealthiest 1% earned as much as bottom 42% -1% did not spend more or buy more; didn’t do enough to keep economy booming-underconsumption and overproduction create economic instability-early credit hides/masks the issue -1929 sees 80% of radios and 60% of cars purchased on credit

THE CRASHBlack Tuesday – October 29, 1929

-Billions lost-marks the traditional beginning of the Great Depression-banks collapse - people make a ‘run’ on the banks – want all of their money -few banks survive

Misguided monetary policy-Federal Reserve – regulates amount of money in circulation – cuts interest rates

to stimulate economy-In 1929 worried about overspeculation, limited amount of money supply in circulation -when market crashes, less money in circulation -as people went to banks to get money, banks cleaned out of cash and forced

to close