What goes up must come down! Essential Question—How did economic choices made in the 1920s lead to the stock market crash and the Great Depression?
Overview The economic boom of the 1920s collapses in 1929 as the United States enters a deep economic depression. Millions of Americans lose their jobs, and president Hoover is unable to end the downslide.
Main Idea As the prosperity of the 1920s ended, severe economic problems gripped the nation. Why it matters now? The Great Depression has had lasting effects on how Americans view themselves and their government
Critical Thinking How did the economic trends of the 1920s help cause the Great Depression? Pg. 670-672 –Industries in trouble –Farmers struggle –Consumers have less money –Living on credit –Uneven distribution of income
Crisis in the Farm District Farmers struggled as a result of the end of WWI. Prices fell with the decreased demand after the war. Farmers began producing more trying to sell more. Made problems worse. Banks began to foreclose on land.
Old Decaying Industries RRRRailroads, textiles, steel making little profits after the war. TTTTrucks, buses and private cars hurt the R.R. industries. NNNNew forms of energy hurt lumber and coal. IIIImproved technology made America too productive.
Living on Credit By the late 1920s consumers buying less due to rising prices, stagnant wages, unbalanced distribution of income and consumer debt due to credit. Many Americans lived beyond their means. (wasteful spending)
Uneven Distribution of Income Rich got richer while the poor got poorer Unequal distribution of wealth meant that Americans could not participate fully in the economic advances of the 1920s
Tariffs and War Debts Hawley-Smoot Tariff Act- highest protective tariff in history designed to protect American farmers and manufactures. Reduced competition, hurt exports, therefore creating loss of jobs. Countries retaliated by raising their tariffs as well. Reduced global trading
Dreams of Riches in the Stock Market… p. 673 The stock market was the most visible symbol of American prosperity in the 1920s. Define: Dow Jones Industrial Average, “bull market”, speculation, buying on margin Describe the financial climate of the stock market during the 1920s.
The Stock Market Crashes The “snowball effect” –In 1929 stocks prices began to dip. This shook peoples confidence and so they started to sell their shares. –This created a chain reaction that would cause prices to plummet which encouraged more people to sell. –“Black Tuesday”—the day of financial collapse in the stock market. (October 29, 1929) Investors lost billions and those involved were stuck with huge debt and lost savings.
Main Idea The stock market crash of 1929 signaled the Great Depression-period of time in which the economy plummeted and unemployment skyrocketed. Skillbuilder—p 676
Unemployment vs. Income and Spending What conclusions can you draw by comparing the two graphs.
Failure in the Economy (Banking) People panicked and withdrew money from banks. “run on the bank” Banks could not give all money back because they invested in the stock market By 1933 11,000 of the nations 25,000 banks closed. Millions of people lost their savings
Failure in the Economy (business) The nation’s total output of goods and services was cut in half. Meaning loss of jobs and investment 90,000 business went bankrupt. Unemployment rose from 3% to 25% by 1933 (13 million workers) Hawley-Smoot Tariff further hurt international trade further hurting business.
Causes of the Great Depression 1. Tariffs and war debt policies that cut down the foreign market 2. A crisis in the farm sector 3. The availability of easy credit 4. Unequal distribution of income 5. Old Decaying Industries
Assignment How do you think the Great Depression changed people’s lives? Write a diary entry from the point of view of the man in this cartoon. Draw an original cartoon to illustrate the impact of financial collapse following the stock market crash. Use the characters in this cartoon or invent your own.
Main Idea During the Great Depression, Americans did what they had to do to survive. Why it matters now? Since the Great Depression, many Americans have been more cautious about saving, investing, and borrowing.
Hardship and Suffering (Cities) Great Depression brought hardship, homelessness, and hunger People lost jobs and homes and were forced to the streets or shantytowns Soup kitchens and bread lines provided food for unemployed and jobless
Hardship and Suffering (Rural) Thousands of farmers lost their land 1929-1932 400,000 farms were lost The drought and over planting created the Dust Bowl which destroyed the American Great Plains region forcing many Americans to migrate West abandoning the land. Okies were migrates from Dust bowl states
Hardships and Suffering (Family) Making ends meet was a daily struggle, families broke apart. Men struggled with frustration from becoming workers to wonderers. Some men abandoned their families. Women battled to keep the family together through budgeting, shopping together, etc. Women were the backbone of the American family during the Great Depression.
Hardships and Suffering (Children) Poor diets and lack of health care lead to serious health problems. Schools were either forced to shorten the school year or shutdown the school. Boys and girls abandoned families and were forced to ride the rails in a free-for-all type atmosphere
Hardship and Suffering (Social) 1928-1932 suicide rates rose more than 30% Mental hospitals grew Economic problems forced people to make sacrifices and readjust priorities Stigma of poverty and having to skimp and save never disappeared. People depended on one another more. All of the effects of the Great Depression shaped your Grandparents and has had some affect on your upbringing.
Main Idea President Hoover’s conservative response to the Great Depression drew criticism from many Americans. Why it matters now… Worsening conditions in the country cause the government to become more involved in the health and wealth of the people.
Hoover and the Depression Hoover believed in rugged individualism meaning people should succeed through their own efforts. Should not depend on government to bail them out. (welfare) Handouts would weaken peoples self- respect and create a welfare state. (Sense of entitlement) Hoover believed that the economy would fix itself and rebound in time. (It did not)
Hoover and the Depression Boulder Dam- public works project that provided work relief, provide electricity, and irrigation to CA, CO, UT, WY, & NM. Read 686—“Democrats Wind in 1930 Congressional Elections” Hoover began providing direct relief to people. –Federal Home Loan Bank Act- lowered mortgage rates & refinanced farmer loans –Reconstruction Finance Corporation- $2 Million for banks, life insurance comp., railroads, business
Hoover and the Depression Why was Hoover destined to lose the Presidential Election of 1932 after the Bonus Army incident? –P. 688 &689
FDR and the New Deal Franklin D. Roosevelt won the election of 1932. Prior to taking office, Roosevelt organized the “Brain Trust”- who were a group of advisers who formulated a set of policies that would later become known as the New Deal. From March 9 to June 16, 1933 the first hundred days of FDR’s presidency he passed 15 major legislations. First action conducted by FDR was to declare a “bank holiday” First and Second New Deal (p. 706)
FDR and the Depression The New Deal forced FDR to practice deficit spending which meant spending more money than the government received in taxes. Supreme Court declared many New Deal legislations unconstitutional because they gave the Executive Branch and the federal government to much power over states and people.
Impact of the New Deal Expanded the government’s role in the economy. Created the FDIC and the SEC. Social Security Tennessee Valley Authority built a number of dams that improved an depressed area of the country. Most importantly it restored hope.
New Deal Legacy Labor- standard wages and rights, eliminated child labor Farmers- price support, improved farming methods Banking/Finance- reformed the stock market, insurance on bank accounts Social Welfare- expand government role to provide for people Environment- increase protection of land Wagner Act, Fair Labor Standards, National Labor Relations Board Soil Conservation Service Securities Exchange Commission, FDIC Social Security CCC, Soil Conservation Service, Tennessee Valley Authority