The Great Depression In the 1920s the science of economics was fairly young. Few recognized the warning signs of a looming crisis--- by 1929, those warning signs became a reality

1920s prosperity ends---stocks plunge in 1929 The Great Crash In the 1920s stock market grew on speculation and people who bought on margin 1920s prosperity ends---stocks plunge in 1929

Buying on margin - only paying a small amount for a stock with the rest of the money borrowed from brokers The stocks profit would pay itself off This only worked if profits continued

Many people could not meet the demand to cover their loans Led to panic selling Black Tuesday- October 29, 1929- stock values fall $14 billion Stocks continue to fall after

Causes of the Great Depression Overproduction Over expansion of credit Fragile corporate structures Ineffective government action

Weaknesses in the Overall Economy Agriculture had been depressed throughout the 1920s- worldwide drop in prices Unemployment hindered railroad coal and textile

Real estate and building declined Automobile sales slowed Under consumption leads to crowded warehouses--- demand drops

Unequal Distribution of Income 1 percent of the nation owned 59 percent of the nation’s wealth 87% of the population owned only 10%. Economy was dependant on the spending of a small portion of the population

Workers did not benefit from the profits gained by the wealthy Workers could not afford what they produced Leads to a severe decline in demand of over produced products

Weak Corporate Structure Consolidated companies held control of various stocks They depended on their profits When one company collapsed it set off a domino effect

Inadequate Government Polices Little regulation by government Taxes favored the wealthy Business consolidation not challenged Federal Reserve Board raised discount rates which discouraged spending

Weak International Economy International economies dependant on US US had less money to lend and invest in Europe Foreign nations had less money to buy American goods and defaulted on loans

Hoover’s Response to the Great Depression Hoover was the first president to deal with Depression. He served as Coolidge’s secretary of commerce and was a self made millionaire and humanitarian. He successfully aided in relieving starving Europeans and helped them recover economically.

Hoover’s Economic Plan Gov’t should not be involved in economy Promoted programs to help business – “trickle down” effect Lent money to railroads, mortgage and insurance companies and banks to avoid bankruptcy

Sets an example for FDR with use of federal work projects to create jobs and stimulate the economy Halted the payment of war debts by European nations

Failure of Hoover’s Program Refusal to provide direct relief Hoover insisted that the economy was improving even as it worsened His response to WWI veterans demands to receive their bonus early destroyed the little popularity he had left

WWI vets take camp in Washington, D.C. Bonus Army: WWI vets take camp in Washington, D.C. Insist to receive bonus payments early Congress refuses their request Vets refuse to leave D.C. Hoover orders army to break up the Bonus Army

Hoover had faith economy would fix itself Believed hard work would earn rewards Believed in self-help and that direct relief would destroy peoples “rugged individualism”

Human Impact of Depression By 1932 25% of the nation was unemployed (12 million people) People lost their life savings Waited on bread lines for hours for food

African American unemployment 30 to 60% greater than white unemployment Women jobs less affected than men's

Families moved in together, marriages were postponed, birth rate dropped as did college enrollment Families in cities lost their homes and lived in unheated shacks know as Hoovervilles

Farmers suffer a severe income drop because people were unable to buy food The Dust Bowl devastated the Great Plains. Droughts and poor farming methods led to giant dust storms that swept across the Great Plains

Culture of the Great Depression Spectator sport became too expensive to watch People played miniature golf, board games, etc. (Monopoly) Movies dealt with grim realities (King Kong, Gone with the Wind, Wizard of Oz) Disney cartoons become popular (Mickey Mouse)