1. The Great Depression Begins Chapter 14
Section 1 – The Nation’s Sick Economy
Section 2 – Hardship and Suffering During the Depression
Section 3 – Hoover Struggles with the Depression

2. Ch. 14 Sec. 1 Objectives
To summarize some of the problems threatening the American economy in the late 1920’s.
To describe the causes of the stock market crash and of the Great Depression.
To explain how the Great Depression affected the economy in the United States and throughout the world.

3. The Nation’s Sick Economy Section 1
5 Effects of the Great Depression on the American Way of Life and Government
Changed American Way of Thinking
Government took a more active role in peacetime economies
Government assumed responsibility for relief
Created the Modern Presidency
Created the Welfare State

4. The Rise and Fall of the Stock Market
Stock Market appeared very stable and strong during the 1920’s.
The # of stocks traded increased steadily.
Use of Broker’s Loans increased.
Money borrowed from banks by stock brokers in order to purchase stock.
The stock is used as collateral.
Property pledged to guarantee a loan.
Some people were worried that stocks were inflated, but most didn’t see any problems.

5. The Bull Market
In March of 1928, a large group launched a buying campaign on General Motors and Radio Corporation of America. Prices soared.
What is it called when the market prices are rising?
Bull Market - Is this a normal market? NO

6. Impact of Speculation Types of Speculators – (Very Dangerous)
Bulls
Those who buy in anticipation of rising prices
Those who buy stock when prices are rising and then sell it for a profit when the prices are higher.
Bears
Those who sell in expectation of falling prices
Investors
Those who buy stock as an investment for long terms and who collect dividends.
Who Dominated the Stock Market in the 1920’s?

7. Buying on Margin Technique used by many speculators.
Stock Brokers use a small percent (10-25) of their own money and borrow the rest from a bank.
Broker’s Loans are also Call Loans.
Loans that can be terminated or called at any time by the lender or borrower.
Meant to be short-term. (A few weeks or months)

8. Black Tuesday Summer of 1929 the London Stock Market Crashed
Speculators begin to panic and sell stock
Prices Fall
Tuesday, October 29, 1929 the bottom fell out of the market and it crashed.

9. Dow Jones Industrial Average
See Page 467 and 468
Dow Jones Industrial Average – the most widely used measure of the stock market’s health.
Measure based on the stock prices of 30 representative large firms traded on the New York Stock Exchange.
Major Moments
Oct , 1929 Dow loses ¼ of its value in famous Black Tuesday Crash
Jan Dow breaks 2000
Oct. 19, 1987 Stock Market Crash on Black Monday
July 16, 1997 Dow reaches 8000
March 29, 1999 Dow reaches 10,000
Oct All time close at over 14,164
History of the Dow Jones @

10. Economic Conditions
National Income Fell from 87.8 Billion to 40.2 Billion
Stock Dividends decreased 56.6%
Salaries Decreased 40%
Manufacturing Wages Decreased 60%
25% Unemployment Rate

11. Election of 1928 Democrats – Alfred E. Smith Republicans –
Career Politician
4 time Governor of New York
1st Roman Catholic to run for President
Republicans –
Herbert Hoover
Sec. of Commerce
Headed Food Adm. During WWI
Mining Engineer
View Hoover

12. Causes of the Great Depression
Stock Market Crash
Slowdowns in Key Industries
Agriculture
Construction
Automobile
Uneven Distribution of Wealth
High Production of Goods / Lack of Demand
People Living on Credit
Government Policies
Cut Taxes on Wealthy
Cut Loans to Foreign Counties
Raised Protective Tariffs (Hawley-Smoot Tariff Act)
Non-Enforcement of Anti-Trust Laws
Banking System
Weak Banking System using funds to invest in stock market