Causes and Effects of the great depression EQ: How did the Great Depression happen, and how did Americans respond to it?

The Great Depression the worst economic crisis in American history in the past, the government did little or nothing and the economy got better Not the first time US had bank runs the nation had to rethink the relationship between government and the welfare of regular people

Overview of Causes Overproduction of goods Under-consumption of agriculture Uneven Distribution of Income Consumer Debt Widespread stock market speculation Political Decisions (Hoover Years)

1. Overproduction of goods Manufacturing continued at wartime rates Consumers were not purchasing goods at the same rate which they were being manufactured The value and price of goods declined, hurting businesses

Under-consumption of agriculture demand for farm produce fell after WWI farmer’s couldn’t pay their loans thousands of farms were seized by banks

Uneven Distribution of Income poor families couldn’t afford to buy goods rich families didn’t buy enough to help the economy 1% made over $10,000 5% made $5,000 – 9,000 29% made $2,000 – 5,000 65% made under $2,000

real estate speculation Consumer Debt real estate speculation Florida land grab – people sold land actually in the ocean average people had no safety net when the depression began 80% of radios purchased on credit 60% of cars purchased on credit

Widespread stock market speculation Buying on “margin’ was the idea of buying stocks on credit. When the price of the stocks dropped people went in to debt and lost their life savings.

Hoover Years Overconfidence in the nations wealth and economy “By adherence to the principles of decentralized self government, ordered liberty, equal opportunity, and freedom to the individual, our American experiment in human welfare has yielded a degree of well-being unparalleled in all the world. It has come nearer to the abolition of poverty, to the abolition of fear of want, than humanity has ever reached before.” —Herbert Hoover, campaign speech, 1928 Overconfidence in the nations wealth and economy Little to no government interventions

Black Tuesday – October 29, 1929 JP Morgan himself tried to buy enough stock to stop the crash 16 million shares were sold in one day Thousands lost their jobs within two months stocks dropped $40 billion about the cost of WWI GE dropped from $400 to $283 a share 11.6.1

Overview - Effects of the Depression Banks and businesses fail Unemployment soars Personal income shrinks High tariffs = less trade with other countries World trade declines American loans to Europe stop Global depression – all major economies are impacted

Banks and Business Fail “Crisis in confidence” Step 1 People Panic and take all of their money out of banks People stop spending money Step 2 Banks start fail – out of money Try to collect on loans owed to them Step 3 Business struggle to keep doors open People loose their jobs – increase in unemployment Step 4 People can’t pay their loans and stop buying goods Businesses begin to fail Unemployment increases even more Step 5 Federal government limits money supply More people can’t pay loans, loose homes and land

American life during the depression Consistent bank runs and banks failures High unemployment Hooverville's Bread lines

Unemployment rates

BANKRUN’s and business failures People panicked and pulled out their entire life savings from the banks This forces banks to fail This happens regularly until 1933 Leads to large numbers of business failures

A boy asleep in a cardboard box in a Ca, Hooverville, 1933 Hooverville's A boy asleep in a cardboard box in a Ca, Hooverville, 1933 a shantytown built by unemployed and destitute people during the Depression of the early 1930s. Named this as an insult to President Hoover

As if economic depression wasn’t enough…. The dust bowl Manmade and Natural Disaster Over development of land Long drought in the Mid-West Farmers went bankrupt Huge, deadly dust storms took away top soil 100 mille/hour winds blew dirt 8,00 feet into the air Dirt blew as far as Boston Okies – farmers moving out of Dust Bowl Most weren’t from Oklahoma Black Sunday, April 1935 Oklahoma 1933