What is a “Snowball Effect” Can you give an example???
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Transcript of What is a “Snowball Effect” Can you give an example???
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What is a “Snowball
Effect”
Can you give an example???
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Great Depression: The period between 1929-1941 of economic hard times that followed the crash
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• The stock market crash did NOT cause the Depression BUT it shook people’s confidence of the economy
• People were shocked & confused as to how the 20s prosperity vanished
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Causes:
• Overproduction– Factories & farms produced vast amount of products– Wages didn’t keep up with prices = workers could NOT afford to
buy goods– Farmers had little $$ for cars & other items– Factories/ farms produced more goods than people were buying– As orders slowed, factories closed or fired people
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Unemployment Rate1929 - 1941
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Causes:
• Weakness of the banking system– Banks made “unwise” loans– Banks lent $$ to people who invested in the stock market– When the market crashed, borrowers could not repay their loans– Without the $$ from loans, the banks could not give depositors
their $$ when they needed it– Result: many banks were forced to close
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Bank Closures• 5,000+ banks closed between 1929-1932• If bank closed – depositors lost the $$ that they had
deposited• Often, a family’s life savings vanished overnight
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A Good Old Timey Bank Run
http://www.youtube.com/watch?v=qu2uJWSZkck
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The Snowball Effects of the GD
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After the crash, the economy slid downhill at a fast pace
Stock market crash ruined investors no $$ from investors businesses could NOT grow or expand
businesses could NOT get loan $$ from banks BECAUSE the crash landed banks in trouble too
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Bankrupt: when businesses are unable to pay debts
Factories cut back on production wages were cut people were fired unemployed workers had little $$
to spend the demand for goods fell further businesses went bankrupt & closed more people
were fired from working
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WW1 Loans
After WW1, U.S. had loaned large amounts of $$ to European nations to pay off war debts…stock market
crash U.S. banks stopped making loans as they were hemorrhaging $$ U.S. banks demanded repayment of
European loans European banks began to fail
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Hard Times• When the crash
happened, millions of Americans lived in cities and worked in factories
• When factories closed, the jobless had no $$ for food & no land to grow any on
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Rising Unemployment
• As depression spread, unemployment rate soared
• ¼ workers were jobless• Millions worked
shortened hours or took pay cuts so people literally worked themselves to death
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Rising Unemployment• The jobless lost their
homes• Streets filled with peddlers,
beggars, scavengers• Shoe shiners• Apple stands• Those who were rich now
experienced how the other half lived
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The Human Cost
• Marriage & birth rates dropped
• Hungry people searched through dumps
• Many families split up as men & boys left to find work & hopefully one day return
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• Many “rode the rails” living in railroad cars & hitching• A return to tenement housing & slum situations• Families starting canning to preserve food • The Great Depression shook the belief in an American
identity – total failure replaced confidence
The Human Cost
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Hoover was deeply concerned as well as confused BUT didn’t think the gov’t should become directly involved
in helping to end the business crisis• He thought that would cause gov’t to become too powerful• We just fought with other countries led by dictators• He felt it was up to businesses to work together to end the
downslide
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Government Relief Programs: programs to help the needy
• At first, Hoover was against these & he urged business leaders to keep workers employed/ maintain wages
• Hoover called on private charities to help the needy• Churches set up soup kitchens: places where the hungry
could get a free meal
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More Gov’t Relief• Ethnic communities organized their own relief efforts• Conditions grew worse• Hoover realized other steps were needed• He set up public works: projects built by the gov’t for public use• Gov’t hired workers to build schools, dams & highways
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More Gov’t Relief• By providing jobs, it enabled people to earn $$• Hoover asked Congress to approve the Reconstruction
Finance Corporation (RFC): 1932 – loaned money to banks, railroads & insurance companies to help them stay in business– The hope was that by saving these businesses, he would save
thousands of jobs
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