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Great Depression

Great Depression. The Good – in the 1920s. Economic indicators were up Employment was high Wages were growing steadily Credit was cheap Profits were growing Production was up The stock market was humming. The Problems. Mal-distribution of Wealth Consolidation and Collusion

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Great Depression

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  1. Great Depression

  2. The Good – in the 1920s • Economic indicators were up • Employment was high • Wages were growing steadily • Credit was cheap • Profits were growing • Production was up • The stock market was humming

  3. The Problems • Mal-distribution of Wealth • Consolidation and Collusion • Stock Market Shenanigans

  4. Mal Distribution of Wealth: Groups Not Sharing the Prosperity • Farmers • Prices drop sharply • Costs increase • Competition • Labor • Wages up, but not significantly • Decreased the buying power • Company profits mostly reinvested

  5. Mal Distribution of Wealth • 1920 -110 million people in US • Top 27,000 people earned more than the bottom 11 million. • People need disposable income to buy stuff

  6. Industrial Consolidation • Consolidation of industry continues • Collusion between big boys leaves competition reeling • Auto • Banks • Public Utilities • Left unchecked by the Harding & Coolidge administrations. • If the big boys fall, the industry will be crushed

  7. The Stock Market Issues • Stocks become overvalued • People begin Trading on Margin • Investment firms would lend people money to invest - up to 90% of the price of the stock. • Crash will ruin people

  8. Warning Signs of Crash • Coolidge decides to not run for President again in 1928. • Danger signs began to appear in early 1929. • Building contracts decline sharply • Business inventories begin to grow dramatically • Consumer spending declines by 50% between 1928-29 • People begin to be laid-off in 1929

  9. The Crash (Sept – late Nov 1929) • Black Tuesday – Oct 29, 1929 • Several crashes and recoveries • mid-November - market down 50% • 1932 - down about 70%

  10. The Economic Depression 1929-1932 • Unemployment – 25% • 12 - 15 million were out of work • Income • 60% drop in salaries • Production • Down 26% by end of 1929, by 50% by end of 1932 • GNP – $81 billion to $41 billion in 1932 • Farm Income – down 57% by 1932

  11. Effects on the People • The wealthy were insulated • If you were poor, unfortunate • Turn to family for help • Breadlines • Some distraught over bleak chances • Some men abandoned their families

  12. Dust Bowl • Farmers in the Plains are ruined • Poor farming practices – lack of crop rotation • Drought in the 30s • Effects of Depression • Dust storms of blowing top soil • John Steinbeck – Of Mice and Men, The Grapes of Wraith

  13. President Herbert Hoover • Iowa – engineer – self-made millionaire - mining business. • Effective engineer and businessman • Had a lot of faith in American capitalism • Believed America close to wiping out poverty • Will guide his policy

  14. The Response of the Hoover Administration to the Depression • Voluntary Agreements • He asks businesses to hold the line on wages and employment. • Government Actions • Hoover: government should not get too involved in economy • (See next 6 slides)

  15. Gov’t Action: Creates a Federal Farm Board • Farm surpluses were being built up • Hoover bought up surplus crops and held them until the market improved. • This encouraged farmers to increase production, which depresses prices further.

  16. Reconstruction Finance Corp • Provided 1.5 billion (in 1932 alone) to private businesses to keep them afloat • Short-term loans – not grants • Gives companies more debt

  17. Increase Tariffs • Believed depression started in Europe. • Isolationist • Smoot-Hawley Tariff • Second largest in US history • Retaliatory Tariffs • Massive decline in trade

  18. Relief policy • Hoover believed in relief, but it was the responsibility of private, philanthropic organizations • He doesn’t commit the government to personal relief.

  19. Created Jobs • 1932 – Public works projects • $500 million dollars to build roads, bridges, etc. • This created jobs for people. • Unfortunately, it was too little, too late for Hoover

  20. Committed to balancing the budget • Tough though because the tax base is dropping since many people aren’t working.

  21. The Tragedy of Herbert Hoover • He’s a very well-qualified, intelligent, well-intentioned person. • He brought a strong, well thought through, conservative business philosophy to the White House. • Yet he fails. • He couldn’t overcome the depression. • He was bound to a political philosophy that wouldn’t work to move America out of the depression.

  22. 1932 - Year of Crisis – The Depression Deepens • The American Mood • Changes over time • Initially (1929-31) – gut out the depression • In 1932, people begin to lose faith in Hoover. • Hoover’s policies designed to address • the corporations • large farming operations • Individuals will fend for themselves • Hunger • Hoovervilles – shantytowns created by homeless

  23. Bonus Army - 1932 • War veterans marched on Washington DC. • Release pension funds decade early • Help ride out depression • Congress and the Hoover Administration were unresponsive. • Hoover demanded evacuation • Sent in troops • Torched their camps • Contributed to national anger • Government pushing around vets

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