The Great DepressionThe Great Depression

““The illusory prosperity and The illusory prosperity and feverish optimism which feverish optimism which marked preceding years marked preceding years have given way to fearful have given way to fearful economic insecurity and to economic insecurity and to widespread despair.”widespread despair.”

- Senator Robert La Follette, - Senator Robert La Follette, Jr., 1931Jr., 1931

Superficial prosperity of the late 1920s hid troubling Superficial prosperity of the late 1920s hid troubling weaknesses – weaknesses that would ultimately lead weaknesses – weaknesses that would ultimately lead to the Great Depression of the 1930s.to the Great Depression of the 1930s.

Industries in trouble!Industries in trouble!

• Railroads losing business to cars/trucks/bus…• Factories faced high demand during war – low demand

during peace time…• Coal suffers as people turn to electricity and gas for

power…• Construction of houses fell steadily after peak year in

1925… How many businesses does this effect?

Struggling Farmers the most!Struggling Farmers the most!-High demand for crops during WWI, war ends and High demand for crops during WWI, war ends and farmers are overproducing and have debts to pay…farmers are overproducing and have debts to pay…

-Boost production to increase profits, but this just Boost production to increase profits, but this just lowers prices further…lowers prices further…

*McNary-Haugen Bill – Gov. buys farm goods at high price and sells them abroad for low price, covers losses with higher sales tax.

President Coolidge vetoes it in ’24, ’26, and ‘28:

“Farmers have never made money. I don’t believe we can do much about it.”

Less money in hands of consumers!Less money in hands of consumers!• Rising prices and stagnant

wages leads to less consumer purchases…

• CREDIT! Many rely on credit – buy now and pay later…creates increased DEBT = less spending..

• Unequal distribution of wealth – – in 1920s, nearly half the nation below

poverty line– wealthy 5% take in 1/3 of nations

income, poor 40% take in about 1/10

Hoover Wins!Hoover Wins!

• “We in America are nearer to the final triumph over poverty than ever before… The poorhouse is vanishing among us.”

– Herbert Hoover

Stock Market Madness!• Stock market rises throughout 1920s• Seen as get rich quick! –

“It seemed as if all economic law had been suspended and a new era opened up in which success and prosperity could be had without knowledge of industry.”

•Speculation and Buying on Margin are not great ideas…

CRASH!CRASH!October 29, 1929 = Black TuesdayBlack Tuesday

Caused when confidence in market starts to waiver and investors pull out quickly as the market plunges, more pull out…

Financial Collapse…

• Banks crash as Americans panic and withdraw their money…– In 1929 – 659 banks closed their doors– By 1933 – 6,000 banks – ¼ of nation’s total – had failed

• 85,000 businesses went bankrupt, gross national product cut in half

• Unemployment: 1929 = 3%, 1933 = 25%