The Great Depression SWBAT: Explain the causes of the Great Depression and how Hoover responded

Do Now What caused the “boom” of the 1920s to “bust” so dramatically in October 1929?

Underlying Causes Declining Demand Industries (coal, railroads, and textiles) saw steady declines in demand as well as agriculture 1926: construction spending dipped $2 billion dollars How many homes does one need? How many plants does a company need? By 1929, automobile industry experiences a 33% drop in sales How long does a car last? How many did consumers need to own in the 1920s?

Underlying Causes Why the decline in demand? Unequal Distribution of Income In the 1920s, the rich grew richer. Middle, and lower-income America experienced a slight growth in wages Demand for products decreased  laid off workers  demand decreased  more layoffs Wealthy Americans invested their income in the stock market The majority of Americans didn’t have enough disposable income to continue purchasing radios, cars, etc.

Underlying Causes Overproduction of consumer goods- catalogs showed people what they DIDN’T have  excessive use of credit Stock Market Speculation- buying on margin Weak farm economy- low prices since end of WWI Government policies- laissez-faire, Federal Reserve did not regulate the economy Global Economic problems

The Stock Market Crash Stock prices soared in 1928  plunged in 1929 October 24, 1929 – “Black Thursday” 12.9 million shares of stock were traded that day for a loss of $4 billion Americans panicked To avoid further losses, J.P. Morgan & Co. puts up $20 million and begins to buy stocks to restore confidence October 29, “Black Tuesday” After losing 13% of its value the previous day, 14 million shares traded for a loss of $14 billion Rockefellers purchased large amounts of stock, as J.P. Morgan & Co. did, but the stock market continued to lose money all through November

The New York Stock Exchange would not recover its 1929 losses until 1954

How does a bank work? DEPOSIT People put their money into a bank The bank pays the depositor (customer) 2% interest on the money you put into the bank BORROW Banks loan the customer’s money to people purchasing homes, cars, and either expensive items The bank charges 6%-10% interest on consumer's loans (That’s how they are able to pay you interest on your account) Banks loan depositors’ money to other consumers Your Savings Account

The Banking Crisis Millions of American investors lost all their invested money overnight Many had purchased stocks on margin If everyone runs to the bank (“bank runs”) to withdraw money, the bank will not have all that money on hand Why not? No one was paying back their loans

The Banking Crisis Bank Failures In banks folded In 1930 bank failures increased to 1,350 In ,293 banks closed In 1932 an additional 1,453 banks shut down

This, in addition to overproduction, declining demand, & the unequal distribution of wealth we discussed

Without assistance from a central bank, the local banks could not survive. Whose idea was it to get rid of the central bank?

Decline in Worldwide Trade Hawley-Smoot Tariff Act (1930) Raised tariffs on imported goods to record levels Europe responded by raising tariffs Exports decreased 61% from $5.4 billion to $2.1 billion Unemployment was at 7.8% in 1930 when the Smoot–Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933* * U.S. Bureau of the Census; Social Science Research Council (1960), Historical Statistics of the United States, Colonial Times to 1957, Washington, DC

“Migrant Mother” – mother of seven children struggling through the Great Depression in California

Men line up for free bread from the Grocers’ Association.

An unemployed man tries to sell apples on the street to earn money

Explain why this locality’s chamber of commerce posted this bill

Explain the irony in this photograph

Unemployment march in New Jersey

Hoover to the Rescue? Pres. Herbert Hoover ( )  “prosperity is just around the corner” “Trickle Down” Theory- gave $ to businesses thinking it would eventually help the workers & consumers Hoovervilles- unheated, shacks, built with cardboard, tin, & crates; those living in a Hooverville, used “Hoover blankets”, aka newspapers

Hoover to the Rescue? The Dust Bowl- a prolonged drought in the Midwest during the 20’s worsened farmers’ already desperate situation Bonus Army Incident (1932) WWI veterans demanded early payment of their bonus  government wouldn’t pay  refused to leave their “camps” in D.C.  Hoover used army tanks & tear gas to disperse the veterans

Wrap Up How did the Dust Bowl effect internal migration? Who will and how will the Great Depression be alleviated?

Extension Crash Course: The Great Depression