Objective: To examine the causes of the Great Depression Do Now: How did an increase in wages help cause an economic boom?

Income increases People purchase more goods “Boom Cycle” Companies expand and hire more people Companies earn higher profits

Causes of the Great Depression I. Stock Market Crash  On Tuesday, October 29, 1929, stock prices plummeted.  This became known as Black Tuesday. https://www.youtube.com/watch?v=I_t-D3_ZZW0

1929 Stock Market Crash (9:31)

Companies included in the DJIA Company 3M Symbol MMM Alcoa AA American Express AXP AT&T T Bank of America BAC Boeing BA Caterpillar CAT Chevron Corporation CVX Cisco Systems CSCO Coca-Cola KO DuPont DD ExxonMobil XOM General Electric GE Hewlett-Packard HPQ The Home Depot HD Company Intel Symbol INTC IBM Johnson & Johnson JNJ JPMorgan Chase JPM Kraft Foods KFT McDonald's MCD Merck MRK Microsoft MSFT Pfizer PFE Procter & Gamble PG Travelers TRV United Technologies Corp. UTX Verizon Communications VZ Wal-Mart WMT Walt Disney DIS

The Philanthropist by, Herb Block (Dec. 5, 1930) During the Great Depression approximately 25% of the workforce was unemployed. People who lost their jobs began selling five-cent apples on the streets of American cities, providing a symbol of the economic hardships of the era.  People that had invested their savings in stocks had little or nothing left.  People that bought stocks on margin (credit) could not repay their debts.

Buying Stocks on Margin: Scenario A Hello, sir. I would like to purchase 100 shares of stock in the Ford Motor Company. How much is it going to cost me? investor stock broker

Buying Stocks on Margin: Scenario A Well, Ford stock costs $10 per share. You want to buy 100 shares? Figure it out yourself, smart guy! investor stock broker

Buying Stocks on Margin: Scenario A Ummm… 100 shares x $10 per share = $1,000.00 Oh, well. I only have $100. I can’t afford 100 shares. investor stock broker

Buying Stocks on Margin: Scenario A No, problem! Just give me $100 and you can owe me the rest! investor stock broker

Buying Stocks on Margin: Scenario A Like, how much would that be? Let me think… $1,000 worth of stock - $100 paid = $900 owed Alright, it’s a deal!! investor stock broker

Buying Stocks on Margin: Scenario A Six months later, Ford stock doubles to $20 per share. My 100 shares are now worth... 100 shares x $20 per share $2,000 investor stock broker

Buying Stocks on Margin: Scenario A That’s great! Now pay me the $900 you owe me! investor stock broker

Buying Stocks on Margin: Scenario A No problemo! It was a pleasure doing business with you! investor stock broker

Buying Stocks on Margin: Scenario A Now let’s figure out how much money I made! $2,000 net worth - $900 owed $1,100 profit - $100 initial investment $1,000 net profit investor

Buying Stocks on Margin: Scenario B Six months later, Ford stock decreases to $1 per share. My 100 shares are now worth... 100 shares x $1 per share $100 investor stock broker

Buying Stocks on Margin: Scenario B Too bad, hotshot! You still owe me $900! investor stock broker

Buying Stocks on Margin: Scenario B But I’m broke! What am I going to do! investor stock broker

Buying Stocks on Margin: Scenario B I don’t care what you do as long as you pay me back! investor stock broker

"I'm In The Market For You” (audio link) by, George Olsen vocal by Fred MacMurray Date: February 9, 1930 I'll have to see my broker Find out what he can do. 'Cause I'm in the market for you. There won't be any joker, With margin I'm all through. 'Cause I want you outright it's true. You're going up, up ,up in my estimation. I want a thousand shares of your caresses too. We'll count the hugs and kisses, When dividends are due, 'Cause I'm in the market for you

Farms and factories overproduced beyond the demand. II. Overproduction / Reduction in Purchasing (Underconsumption) Farms and factories overproduced beyond the demand. Businesses cut  production Demand for goods fell. Workers suffered from wage cuts and lay offs. People had  little or no  money to spend.

Many of those loans had been to investors to buy stocks III . Bank Failures When the stock market crashed, people could not repay their loans to the bank. Many of those loans had been to investors to buy stocks Therefore, banks couldn’t give depositors their money and banks closed. Many people lost their life savings. https://www.youtube.com/watch?v=jSNXxShN2k8 This shook people to their core. The basis of American economic strength had always been work + thriftiness. Now, neither of them seemed to count for anything.

https://www.youtube.com/watch?v=iPkJH6BT7dM

A farm is being sold at a foreclosure sale in Iowa A farm is being sold at a foreclosure sale in Iowa. Military police were on hand to keep farmers from disrupting the auction. ca. 1935.

IV. Government Action Makes Things Worse 1931: Government raises interest rates Less $$$$ moving through the economy Remember: war debt repayment issue How European nations raise $$ to pay debts? The Government raised tariffs on imported goods Hawley Smoot Tariff Act Great Depression goes global

"How Can A Poor Man Stand Such Times And Live "How Can A Poor Man Stand Such Times And Live?” audio; written and played by Blind Alfred Reed, Dec. 4, 1929, New York City There once was a time when everything was cheap, But now prices nearly puts a man to sleep. When we pay our grocery bill, We just feel like making our will -- I remember when dry goods were cheap as dirt, We could take two bits and buy a dandy shirt. Now we pay three bucks or more, Maybe get a shirt that another man wore -- Tell me how can a poor man stand such times and live? Well, I used to trade with a man by the name of Gray, Flour was fifty cents for a twenty-four pound bag. Now it's a dollar and a half beside, Just like a-skinning off a flea for the hide -- Tell me how can a poor man stand such times and live?

Oh, the schools we have today ain't worth a cent, But they see to it that every child is sent. If we don't send everyday, We have a heavy fine to pay -- Tell me how can a poor man stand such times and live? Prohibition's good if 'tis conducted right, There's no sense in shooting a man 'til he shows flight. Officers kill without a cause, They complain about funny laws -- Tell me how can a poor man stand such times and live? Most all preachers preach for gold and not for souls, That's what keeps a poor man always in a hole. We can hardly get our breath, Taxed and schooled and preached to death -- Tell me how can a poor man stand such times and live?

Oh, it's time for every man to be awake, We pay fifty cents a pound when we ask for steak. When we get our package home, A little wad of paper with gristle and a bone -- Tell me how can a poor man stand such times and live? Well, the doctor comes around with a face all bright, And he says in a little while you'll be all right. All he gives is a humbug pill, A dose of dope and a great big bill -- Tell me how can a poor man stand such times and live? Video: Bruce Springsteen “How Can a Poor Man Stand Such Times and Live?” Live in New Orleans, 2006, after the devastation of Hurricane Katrina.