1. THE GREAT DEPRESSION The Nation’s Sick Economy

2. The future’s so Bright, I gotta wear shades? 1920’s were a prosperous decade to many, but not all. Trouble is just around the corner! Warning signs that “all was not what it seemed to be”. - Industries begin to struggle -Farmers accumulate massive debts - Consumers begin to have less to spend.

3. Signs of Weakness: Industry  Railroads, mining, lumbering all hit hard: coal being replaced by new forms of energy such as hydro- electric and natural gas.  Boom industries like automobiles and housing show signs of weakening.

4. Farmers need help!  The 20’s were not particularly good to farmers. Crop prices fall more than 40% after WWI.  Combination of loans, falling prices, and over supply of crops cause many to default. Banks forclose.  Many rural banks close do to farmers inability to pay back loans.  McNary-Haugen Bill- Would give “price supports” for various crops. Government would buy the crops and sell worldwide. President Coolidge vetoed the bill.

5. Consumer Issues: Over Spending and Uneven spread of wealth  Buying binge begins to fade. Why? Not much change in wages and accumulation of debt. - many are living beyond their means. Remember the “installment plans”?  Uneven Distribution of wealth: - the wealthiest 1% get 75% wealthier. - average for rest of the pop. = 9%  Many Americans could not participate in the economic “advances” of the times: 70% earned $2,500 or less.

6. Herbert Hoover Becomes President  Wins the 1928 election over Al Smith. Landslide.  “We in America are nearer to the final triumph over poverty than ever before”

7. Riches in the Stock Market  Dow Jones Industrial Average: based in NY. Essentially used to take temperature of the NY Stock Exchange, where stocks were traded.  Stock Market explodes with growth in the 20’s! - Many invest to “strike it rich” - filled with “speculators” (those who buy and sell quick to turn a profit)  Buying on margin: putting little money down to purchase a stock, and borrowing the rest from a broker, who in turn borrows from the bank. This is very risky. Why?

8. CRASH! Black Tuesday.  Market starts to waver in September 1929. Some begin to pull out of the market now.  Market tumbles throughout October.  October 29, panic sets in. Market loses over 16 million shares. Lost almost 14 a few days earlier. Becomes known as “Black Tuesday”  Those who bought on margin lose money. Brokers lose money. Banks who loaned money end up with devastating losses. Most people lose their savings!  By mid November over 30 billion is lost.

9. Overall Financial Collapse  Bank and Business Failures: “Bank runs” occur. Over 11,000 of the nations banks fail by 1933.  Government did not protect savings. People lose millions.  GNP cut in half between 1929 and 1932  Over 90,000 businesses go bankrupt. RR hit hard as is the auto industry.  Unemployment hits 25% in 1932. (What is it today?)

10. Worldwide effect:  Europe was still digging out from WWI  Germany was indebted for war reparations. However, the Hawley-Smoot Tariff Act of 1930 really makes the situation even stickier! 1. It was designed to protect American goods, and workers so it slaps a high tariff on imports. Results in a huge decline in GDP (SEE PREVIOUS!) 2. Other countries retaliate by raising their tariffs! Trade plummets 40%!!!

11. Wrap up : Causes of the Great Depression:  Easy Credit  Farm debt  Unequal distribution of wealth  Top heavy market  Tariffs and policies that restrict trade worldwide