What is a “Snowball Effect” Can you give an example???

1. What is a “Snowball Effect” Can you give an example???

2. Great Depression: The period between 1929-1941 of economic hard times that followed the crash

3. 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

4. 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

5. Unemployment Rate1929 - 1941

6. 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

7. 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

8. A Good Old Timey Bank Run http://www.youtube.com/watch?v=qu2uJWSZkck

9. The Snowball Effects of the GD

10. 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 BECAUSEthe crash landed banks in trouble too

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. The Human Cost • 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

18. 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

19. 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

20. 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

21. 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