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
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

34. b

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%