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THE GREAT DEPRESSION Chapter 11. Appearances Versus Reality GGross National Product (GNP): total value of goods and services produced by a nation RROSE.

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Presentation on theme: "THE GREAT DEPRESSION Chapter 11. Appearances Versus Reality GGross National Product (GNP): total value of goods and services produced by a nation RROSE."— Presentation transcript:

1 THE GREAT DEPRESSION Chapter 11

2 Appearances Versus Reality GGross National Product (GNP): total value of goods and services produced by a nation RROSE 30% EExplosive growth of automobile FFEELING of prosperity encouraged spending APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

3 Appearances Versus Reality SSTOCKS: OWNERSHIP IN A COMPANY IIf corporation succeeds, value rises CCorporation doesn’t do well, loses value SStock market performed spectacularly AAttitude was stocks wouldn’t go down APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

4 Appearances Versus Reality FFAITH IN BUSINESS AND GOVERNMENT PProsperity of 1920s showed triumph of American business ““chief business of America is business” Calvin Coolidge APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

5 Appearances Versus Reality HHERBERT HOOVER EElected in 1928 IImpressive record of public service BBusinesslike administrator APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

6 Appearances Versus Reality DDISTRIBUTION OF WEALTH: SSmall number of people truly prospered WWealthiest 1% income rose 60% MMost workers saw 8% 770% of farmers didn’t make enough MMany reaching credit limits APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS GGNP = prosperity SStocks couldn’t fail FFaith in Business HHerbert Hoover

7 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover CCREDIT PPeople bought stocks on credit MMade prices rise sharply APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

8 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover BBUYING ON MARGIN IInvestor wants 100 shares in a company $$10/share = $1,000 OOnly pay for a portion $$500 BBorrow other $500 from broker PPay off loan once stock sold APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

9 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover BBUYING ON MARGIN AAs enthusiasm for investing grew, brokers required lower margins for purchases GGave bigger loans 11929: buy stock for 10% of cost APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

10 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover BBUYING ON MARGIN IIf stock rose to $15, the $1,000 investment would rise to $1,500 TThe investor would get back original $500, repay $500 loan, and still have $500 profit IIf stock fell to $5/share the sale would only be $500 which would have to be used to sell off the loan. No profit, out original $500 investment APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

11 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover BBUYING ON MARGIN MMARGIN CALL: Broker could force investors to repay loans if value fell YYou’re in big trouble if your stock’s value falls APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

12 Appearances Versus Reality  GNP = prosperity  Stocks couldn’t fail  Faith in Business  Herbert Hoover TTHE FEDERAL RESERVE NNation’s central bank TTakes actions and sets policies to regulate nation’s money supply KKeeps economic activity healthy UUnable to keep business from loaning investors money APPEARANCES: PROSPERITYREALITY: ECONOMIC WEAKNESS

13 Stock Market reaches it’s high point Many people began to recognize signs of trouble Sales began sagging Rumors spread that big investors were getting ready to take money out of market September 3, 1929

14 Nervous investors began selling stocks Others noticed increased activity and joined selling Few people willing to buy millions of stocks flooding market, stock market prices plunged, triggering greater panic to sell Toward the end of the day, a number of leading bankers joined to buy stocks to prevent further collapse Thursday, October 24, 1929

15 Market returned to normal Some stocks gained value Friday, October 25, 1929

16 Good feelings from Friday gone Market sank like a stone Monday, October 28,1929

17 Panic completely overtook the markets Investors dumped more than 16 million shares Affected strongest companies BLACK TUESDAY Stock market lost $16 Billion Tuesday, October 29, 1929

18 View image of man with car, read insets Summarize effects of crash in graphic organizer

19 The MOST severe economic downturn in the history of the US (and the World)  25% Unemployment  5,000 Banks closed  Hundreds of Thousands Homeless Great Depression ( )

20 Bank Failures

21  Reaches 25%  Businesses go out of business, people lose jobs, stop shopping, more businesses go out of business Unemployment Businesses Closes People out of work Stop Shopping

22 Homelessness

23  Angry at the banks  Shame at losing everything Emotional Toll

24 The Dust Bowl

25 Hoover Responds

26 Franklin Delano Roosevelt (FDR)

27 The New DealThe New Deal – The Three Rs

28 New Deal Programs  CCC  AAA  NIRA  PWA  TVA  EBA  NLRB  FHA  CWA  WPA  SEC  FDIC  REA  FSA  SSA

29 Temporarily closed banks to find problems in banks and fix them Created by the Glass-Steagall Act (first Fireside Chat explained this) Reform Emergency Banking Act

30 Protected depositors money in case banks closed Reform Federal Deposit Insurance Corporation

31 Gave men 21+ jobs planting trees and building parks Relief Civilian Conservation Corps

32 Gave farmers SUBSIDY to plant less to raise prices Recovery Agricultural Adjustment Act

33 Businesses in same industry must set prices and levels of production Reform National Industrial Recovery Act

34 Hired artists to document and improve the Great Depression (paintings, pictures, writings, etc) Relief Works Progress Administration

35 Brought affordable electricity to thousands by building dams and introducing new farming techniques Recovery Tennessee Valley Authority

36 Provides a pension to retired workers 65+ Relief Social Security Act

37 Encouraged loans for building homes Recovery Federal Housing Administration

38 Made electricity available to thousands Recovery Rural Electrification Administration

39 During the Great Depression Art & Culture

40 Art  Grant Wood: “American Gothic” (1930)  Shows American ideals – hard work, domesticity

41 Movies  Gone with the Wind (1939) idealizes the South during the Civil War  Wizard of Oz (1939) Teaches young girl that there is “no place like home”

42 Radio  War of the Worlds October 30, :50


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