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The Great Depression Causes and Impact. What is a depression? A period of severe reduced economic activity A period of severe reduced economic activity.

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Presentation on theme: "The Great Depression Causes and Impact. What is a depression? A period of severe reduced economic activity A period of severe reduced economic activity."— Presentation transcript:

1 The Great Depression Causes and Impact

2 What is a depression? A period of severe reduced economic activity A period of severe reduced economic activity Sharp rise in unemployment Sharp rise in unemployment Decrease in consumerism due to unemployment Decrease in consumerism due to unemployment The October 29 th, 1929 was not the only depression the US suffered but it was by far the very worse. The October 29 th, 1929 was not the only depression the US suffered but it was by far the very worse.

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4 Stock Market Crash #1 Margin Buying #1 Margin Buying –Speculators bought on margin –Borrowed $ from stockbrokers –Stock became collateral –When stocks increased speculators sold the stock, repaid broker & profited –When stocks began to decline brokers called in stocks –When speculators couldn’t repay the loan brokers sold the stockbrokers called in their margins

5 #2 Overproduction AKA “plague of plenty” or “great glut” of farm & factory goods AKA “plague of plenty” or “great glut” of farm & factory goods Nation’s ability to produce surpassed its ability to consume Nation’s ability to produce surpassed its ability to consume Profits of big business went to wealthy who reinvested in factories rather than raising salaries & wages which would have stimulated more consumerism Profits of big business went to wealthy who reinvested in factories rather than raising salaries & wages which would have stimulated more consumerism Installment & credit also encouraged overproduction while new technology added to unemployment Installment & credit also encouraged overproduction while new technology added to unemployment

6 #3 International Economic Problems Remember the Dawes Plan? When US banks were lending Germany $ so it could pay reparations to Allies & speed recovery of the postwar economy. Remember the Dawes Plan? When US banks were lending Germany $ so it could pay reparations to Allies & speed recovery of the postwar economy. During the “bull market” when stocks were increasing banks stopped loaning as much $ to Europe and loaned it instead to brokers who were selling stocks on margin. During the “bull market” when stocks were increasing banks stopped loaning as much $ to Europe and loaned it instead to brokers who were selling stocks on margin. This decreased international trade This decreased international trade Followed by high US tariffs Followed by high US tariffs Contributed to more underconsumption Contributed to more underconsumption

7 #4 Restrictive Monetary Policy The Federal Reserve System which is responsible for regulating the amount of money in circulation followed a restrictive policy that dried up credit. The Federal Reserve System which is responsible for regulating the amount of money in circulation followed a restrictive policy that dried up credit. Tightened the money supply Tightened the money supply

8 #5 Depressed Farms & Industries Major industries laid off workers in ’20s Major industries laid off workers in ’20s Less $ to consume projects Less $ to consume projects

9 Who Was Hurt by the Depression? Speculators & long term investors Speculators & long term investors Overnight they went from millionaires to paupers – in a few months stock prices fell 75% Overnight they went from millionaires to paupers – in a few months stock prices fell 75% Joke at the time about guests checking in at a home “For sleeping or jumping?” Joke at the time about guests checking in at a home “For sleeping or jumping?” Regular “innocent” people who put their savings in banks. Regular “innocent” people who put their savings in banks. Banks had lent $ to brokers, when margins weren’t repaid they lost everything Banks had lent $ to brokers, when margins weren’t repaid they lost everything Banks were not insured at the time like today Banks were not insured at the time like today

10 Depositors Waiting to Withdraw their savings

11 Failure of the Banks

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13 Hoover’s Initial Response His response was consistent with Republican philosophy – minimal gov interference in the economy His response was consistent with Republican philosophy – minimal gov interference in the economy However…. However…. Asked business leaders for a pledge not to cut wages or production of goods Asked business leaders for a pledge not to cut wages or production of goods Suggested that city & state govs fund bldg projects Suggested that city & state govs fund bldg projects Agric Marketing Act & Farm Board (?) Agric Marketing Act & Farm Board (?) Farmers lost their mortgages Farmers lost their mortgages

14 Depression Worsens ,000 businesses failed; 32,000 in ,000 businesses failed; 32,000 in 1932 Average income in 1929 was $2300 reduced to $1600 by 1935 Average income in 1929 was $2300 reduced to $1600 by 1935 Unemployment in 1929 was 5% and rose to 25% by 1932 Unemployment in 1929 was 5% and rose to 25% by 1932 Bread lines, soup kitchens, Hoovervilles Bread lines, soup kitchens, Hoovervilles Brother Can You Spare a Dime? Yip Harburg Brother Can You Spare a Dime? Yip Harburg

15 Soup Kitchen

16 Food lines

17 Poverty

18 Bread Line - NYC

19 Hoovervilles

20 Too Little Too Late Hoover reluctantly agrees to intro new gov programs. Hoover reluctantly agrees to intro new gov programs. Reconstruction Finance Corp – largest fed’l program ever at that time Reconstruction Finance Corp – largest fed’l program ever at that time Authorized to dispense $2 billion – supposed to have trickle-down effect Authorized to dispense $2 billion – supposed to have trickle-down effect Emergence Relief Act - $300 m to states on verge of bankruptcy Emergence Relief Act - $300 m to states on verge of bankruptcy Neither successful Neither successful

21 Bonus Army 1932 Veterans of Great War were promised a bonus payment in 1945 Veterans of Great War were promised a bonus payment in 1945 Veterans organized the march to lobby for early payment Veterans organized the march to lobby for early payment Very well disciplined & organized Very well disciplined & organized Agreed to honorable code of conduct Agreed to honorable code of conduct By the time they reached DC there were 1700 By the time they reached DC there were 1700 Senate rejected the bill Senate rejected the bill

22 Aftermath Most veterans returned home Most veterans returned home About 2000 remained About 2000 remained Hoover dispatched Douglas McArthur & his aide Eisenhower to force veterans out Hoover dispatched Douglas McArthur & his aide Eisenhower to force veterans out Cavalry, infantry, tanks, machine guns were present Cavalry, infantry, tanks, machine guns were present Torched the “Hoovervilles” Torched the “Hoovervilles” 100 people injured 100 people injured 1 Child killed from tear gas 1 Child killed from tear gas

23 Bonus Army Encampments 1932

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25 Bonus Army Asks for Early Relief

26 US Army Uses Force to Disperse Bonus Army

27 US Army Torches Camps

28 Hard times a “hoovering”

29 Impact of the Bonus March Political suicide for Hoover – seen as bully Political suicide for Hoover – seen as bully “Nailed his coffin shut” “Nailed his coffin shut” Press commented “What a pitiful spectacle that the American Government, mightiest in the world, chasing unarmed men, women and children with Army tanks.” Press commented “What a pitiful spectacle that the American Government, mightiest in the world, chasing unarmed men, women and children with Army tanks.”

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31 The End Section 1

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