Great Depression

1. Great Depression • Chapter 22 • Section 1

2. Brainstorming: • What is a depression? • What were some of the warning signs of the Great Depression?

8. Industries in Trouble • superficial prosperity hid economic weaknesses • railroads, textiles, and steel had barely made a profit

11. mining & lumbering were no longer in demand • coal-mining hard-hit, due to new forms of energy

12. Farmers Need a Lift • WWI - prices rose & international demand for crops such as wheat & corn soared • farmers planted more & taken out loans for land & equipment • demand fell after the war & crop prices declined by 40 percent or more

13. farmers boosted production in the hopes of selling more crops, but this only depressed prices further • 1919-1921 annual farm income declined from $10 billion to just over $4 billion

15. Literally using HorsePower

16. farmers couldn’t pay off loans • farms lost when banks seized the property as payment • as they default on loans, many banks began to fail • auctions were held to recoup some of the banks’ loans

17. Foreclosure Auction in Iowa

18. McNary-Haugen Bill • called for price-supports for key products • government would buy surplus crops at set prices and sell them on world market • President Coolidge vetoed the bill twice

19. Consumers Have Less Money • Farmers bought fewer goods/services • Americans were buying less • rising prices • stagnant wages • unbalanced distribution of income • overbuying on credit • Production expanded faster than wages, resulting in a gap between rich and poor

20. Living on Credit • Bought goods on credit w/interest • Many had trouble paying off their growing debts • Faced with debt, many cut back on spending

21. Uneven Distribution of Income • Wealthiest income (only 1% of the population) rose by 75% • 70% of nation’s families earned less than $2500 a year • Families earning 2X that much couldn’t afford many household products

22. YEE HAW Game • Get into pairs • Take a direction sheet and await directions • You must make your decision and annotate it in ink • All decisions are final

23. Dreams of Riches in the Stock Market • Economists warned of weaknesses in the economy, but most Americans confident in the nation’s economic health • Stock market became the symbol of a prosperous American economy

24. Hoping to Strike it Rich • speculation – buying stocks & bonds on chance of quick profit, ignoring the risks • Buying on margin – paying a small of % a stock’s price as a down payment & borrowing the rest

25. Effects of this Practice: • Caused the upward spiral • Rising prices didn’t reflect the companies’ worth • If the value of stocks declined, people who had bought on margin had no way to pay the loans.

26. The Stock Market Crashes • Early September 1929, stock prices peaked and then fell • investors quickly sold their stocks and pulled out • October 24, the market took a plunge and panicked investors unloaded their shares

27. Black Tuesday • October 29, 1929 • Bottom fell out of the market • Tried to sell before prices plunged even lower

28. Stock Market Bubble Burst • People who bought on credit were stuck with huge debts as prices plummeted, while others lost their savings • by mid-November investors had lost about $30 billion (amount equal to how much America paid for WWI)

29. Financial Collapse • Stock market crash symbolized beginning of the Great Depression • The economy plummeted and unemployment skyrocketed • Crash hastened the collapse of the economy and made the depression more severe

30. Bank and Business Failures • Many withdrew their money from the banks

31. The Banks • many invested in the stock market • By 1933, 11,000 of the nations 25,000 had failed • Because the government did not protect or insure bank accounts, millions of people lost their savings accounts

32. the gross national product – nation’s total output of goods & services – was nearly cut in half • About 90,000 businesses went bankrupt

33. Millions Lost Jobs • Unemployment increased to 25% in 1933. • One out of every four workers was out of a job • Those who kept their jobs faced pay cuts and reduced hours

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35. Some were Lucky • Sold their stocks before the crash and made money • Joseph P. Kennedy, the father of future president John K. Kennedy, was one who did • Most were not so lucky

36. Causes of Great Depression 1. Old and decaying industrial base • outmoded equipment made some industries less competitive

37. 2. A crisis in the farm sector • Farmers produced more than they were able to sell, especially with the end of WWI and the disappearance of markets that the war had opened to them

38. 3. The Availability of easy credit • Many people went into debt buying goods on the installment plan

39. 4. An unequal distribution of income • There was too little money in the hands of the working people, who were the vast majority of consumers.

40. Dow Jones Industrial Average • was barometer of the stock market’s health • A measure based on the stock prices of 30 large firms trading on the New York Stock Exchange • 1920’s - stock prices rose steadily

41. Worldwide Shock Waves • Europe suffered recovering from war & faced debts • Germany paying war reparations • Great Depression added to problems by limiting U.S. ability to import European goods • Difficult to sell U.S. farm products & manufactured goods abroad

42. Hawley-Smoot Tariff (1930) • highest protective tariff in U.S. history • Designed to protect American Farmers & manufacturers from foreign competition • Unemployment worse in industries that could no longer export goods Europe

43. Results of the Tariff: • Many countries retaliated by raising their own tariffs • Within a few years, world trade had fallen more than 40%