2 CHAPTER 15: Crash and Depression Section The Stock Market CrashSection Social Effects of the DepressionSection Surviving the Great DepressionSection The Election of 1932
3 The Stock Market CrashWhat events led to the stock market’s Great Crash in 1929?Why did the Great Crash produce a ripple effect throughout the nation’s economy?What were the main causes of the Great Depression?
4 The Market CrashesIn early 1928, the Dow Jones Industrial Average, an average of stock prices of major industries, had climbed to 191.By March 4, 1929, it had risen another 122 points. By September 3, the Dow Jones average reached an all-time high of 381.Prices for many stocks soared far above their real value in terms of the company’s earnings and assets
5 The Market CrashesBlack Thursday: After the peak in September, stock prices fell slowly. When the market closed on Wednesday, October 23, the Dow Jones average had dropped 21 points in an hour. The next day, Thursday, October 24, worried investors began to sell, and stock prices fell.To stop the panic, a group of bankers pooled their money to buy stock, which stabilized prices, but only for a few days.
6 The Market CrashesBlack Tuesday: On Tuesday, October 29, a record 16.4 million shares of stock were sold. The collapse of the stock market is known as the Great CrashThe Dow Jones average continued to fall, reaching 198 by November. Overall losses totaled $30 billionThe Great Crash was part of the nation’s business cycle, a span in which the economy grows, then contracts
7 The Ripple Effect of the Crash The effects of the crash were initially only felt by those who were heavily invested in the stock market, about 4 million people out of a population of 120 million.How the crash spread to all Americans:risky loans hurt banks, consumer borrowing, bank runs, bank failures, savings wiped out, cuts in production, rise in unemployment, and further cuts in production
8 The Ripple Effect of the Crash Economic Contraction: an economic decline marked by a falling output of goods and services.A particularly long and severe contraction is called a depressionThe result of the Great Crash triggered the most severe economic downturn in the nation’s history: the Great DepressionImpact on Workers and Farmers: With no money and little incentive to produce goods, factories began to close and thousands of workers lost their job or endured pay cuts.Impact on the World: By the 1930s, international banking, manufacturing, and trade had made nations around the world interdependent, so when the U.S.- the world’s leading economy- fell, the global economic system began to crumble or contract much like the U.S.
9 The Ripple Effect of the Crash Great CrashInvestorsBusinesses and WorkersInvestors lose millions.Businesses lose profits.Consumer spending drops.Workers are laid off.Businesses cut investment and production Some fail.BanksBusinesses and workers cannot repay bank loans.Savings accounts are wiped out.Bank runs occur.Banks run out of money and fail.World PaymentsOverall U.S. production plummets.U.S. investors have little or no money to invest.U.S. investments in Germany decline.German war payments to Allies fall off.Europeans cannot afford American goods.Allies cannot pay debts to United States.
10 Underlying Causes of the Depression An Unstable Economy: the economy of the 1920s lacked a firm base; national wealth was unevenly distributed; most money in the hands of a few families who tended to invest rather than buy goodsOverspeculation: speculators bought stocks with borrowed money and then pledged those stocks as collateral to buy more stocksGovernment Policies: Federal Reserve System cut interest rates to spur economic growth; Federal Reserve worried about overspeculation and limited the money supply to discourage lending too little money in circulation to help the economy recover after the Great Crash
11 Social Effects of the Depression How did poverty spread during the Great Depression?What social problems were caused by poverty in the 1930s?How did some people struggle to survive hard times?
12 Poverty SpreadsThose hit hardest by the Depression were those at the bottom of the economic ladderUnemployed laborers unable to pay rent moved in with relatives, others driftedHomeless people built shanty towns with sacks of tar paper, cardboard, or scrap material and called them “Hoovervilles,” mocking the President because they believed he was not doing anything to resolve the crisisMany homeless and jobless became drifters, hitchhiking from one “hobo jungle” to another, thousands jumped on trains illegally to travel across the country; by 1933, an estimated 1 million people were on the move, risking jail, injury, or death
13 Poverty SpreadsFarm Distress: low crop prices cut farm families’ income; farmers lost their farms when they could not pay their mortgageThe Dust Bowl: Between 1931 and 1940, so much soil blew out of the central and southern Great Plains that the region became known as the Dust Bowldust storms were the result of severe drought and farming practiceslow crop prices and bad weather caused 60% of Dust Bowl families to lose their farmsrelief did not come until the early 1940s when the rains arrived and WW2 drove farm prices up
15 Poverty Strains Society As the Depression wore on, it took a serious physical and psychological toll on the entire nation. Unemployment and fear of losing a job caused great anxiety; people became depressed or suicidal- Some people starved and thousands went hungry.- Children suffered long-term effects from poor diet and inadequatemedical care.Impact on Health- Living conditions declined as families crowded into small houses orapartments.- Men felt like failures because they couldn’t provide for their families.- Working women were accused of taking jobs away from men.Stresses on Families- Competition for jobs produced a rise in hostilities against AfricanAmericans, Hispanics, and Asian Americans.- Lynchings increased.- Aid programs discriminated against African Americans.Discrimination Increases