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The Great Depression and New Deal (1929 – 1941)

Great Depression Begins. The Great Depression and New Deal (1929 – 1941). The Economy of the Late 1920’s. 1928 Election showed faith in the Republican Party. Herbert Hoover defeated Al Smith (D).

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The Great Depression and New Deal (1929 – 1941)

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  1. Great Depression Begins The Great Depression and New Deal (1929 – 1941)

  2. The Economy of the Late 1920’s • 1928 Election showed faith in the Republican Party. Herbert Hoover defeated Al Smith (D). • Welfare Capitalism – Employers undermined labor unions by giving more benefits to workers. Wages up more than 40% and unemployment was under 4%. Consumption was up and American confidence was up. • 1925 Stock Market = $25 Billion by Oct. 1929 = $87 Billion! “Everyone could be rich if they invested $15/ week for 20 years = $400 per month income until they died! “

  3. FARMERS STRUGGLE • No industry suffered as much as agriculture • During World War I European demand for American crops soared • After the war demand plummeted • Farmers increased production sending prices further downward Photo by Dorothea Lange

  4. CONSUMER SPENDING DOWN • By the late 1920s, American consumers were buying less • Rising prices, stagnant wages and overbuying on credit were to blame • Most people did not have the money to buy the flood of goods factories produced

  5. GAP BETWEEN RICH & POOR • The gap between rich and poor widened • The wealthiest 1% saw their income rise 75% • The rest of the population saw an increase of only 9% • More than 70% of American families earned less than $2500 per year Photo by Dorothea Lange

  6. HOOVER WINS 1928 ELECTION • Republican Herbert Hoover ran against Democrat Alfred E. Smith in the 1928 election • Hoover emphasized years of prosperity under Republican administrations • Hoover won an overwhelming victory

  7. Young Hoover supporter in 1928

  8. 1. The Rich got Richer and the Poor became less Poor! • 0.1% of Americans had incomes over $100,000 & they had over 34% of all savings accounts. • 71% of families earned $2500/ yr. or less. • Workers were 40% more productive, but paid only 8% better! • 1% made $10,000 +/ yr.

  9. 2. Easy Credit Hides the Gap Between the Rich and Poor – temporarily! • Buying on Time and Installment Plans allowed people to spend money they didn’t have and people lived beyond their means (radios, cars, appliances, etc.)! • Personal Debt Skyrocketed during the 1920’s!

  10. 3. Speculation on Stocks in the Bull Market of the 1920’s! • Easy Credit led to Buying on Margin – 10% - 50% per share of stock up front and borrow the rest at high interest! • Very risky, but as long as prices rose it was win/ win for everyone! • Brokers could call in margins anytime. • Led to inflation of stock prices!

  11. 4. Overproduction Led to Layoffs! • Overproduction caused many durable goods to stockpile in warehouses! • The auto industry began to slump after 1925 and related industries suffered too. • Massive layoffs of workers resulted! • Banks were hurt too!

  12. 5. Farmers Suffered Earlier and More Often During the 1920’s! • Farm prices fell from lofty heights after WW I (1914 – 1918)! • One-fourth of America’s workers were farmers! • Farmers often had to overextend on credit to survive. • 6000 Rural Banks before the 1929 Crash! • Farmers too overproduced!

  13. Exit Slip – Causes of the Depression 1. T or F: Stock prices rose steadily during the 1920’s. 2. T or F: Most American families earned more than $2500 a year during the 1920’s. 3. T or F: Credit was harder to get for most Americans during the 1920’s. 4. T or F: Farmers prospered during the 1920’s as they had during WW I as farm prices continued to rise throughout the decade.

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