Great Depression USH-6.3

I. Underlying Problems Declining demand and overproduction were the main causes 1920s seemed good w/high employment Production & per capita income rose Distribution of income was uneven with rich and poor getting farther apart Workers didn’t get profits

I. Underlying Problems A bad cycle started Workers stop buying goods Company make less $ Company lays off workers Fewer workers buy goods Company makes less $ Company lays off more workers Etc…

I. Underlying Problems Farm economy collapsed Farmers expanded during WWI with big markets Lost markets after WWI Couldn’t make payments on land & equipment Grew more crops to make up the difference Foreclosures on land caused lots of banks to close BEFORE the stock market crash Less money to loan others

II. Republicans In 1920s, Republican administrations gave up on limiting Big Business More laissez-faire made companies more powerful Raised tariffs Tax on imports Supreme Court overturn child labor laws & female minimum wages

II. Republicans Income taxes on the wealthy were cut They spent more on luxury items Didn’t make up for everyone else NOT spending Spent their money on stocks instead of new factories Drove up stock speculation “Will I be able to sell before the price falls?”

III. Stock Market Stocks could be bought on margin Investors could borrow using the stock they owned to buy more stock Speculation led to inflated stock values and the crash Lots of sellers in October of 1929

III. Stock Market Firms began to call in margin loans Investors had to sell at low prices to pay back loans Stock prices plunge “Black Tuesday” October 29, 1929, the bottom fell out WAS NOT THE CAUSE OF THE GREAT DEPRESSION!!!

IV. Deeper in debt Federal Reserve began in 1913 as a national bank Fed is to regulate money supply by making loans to banks Low interest rates in early 1920s and raised them over the decade Even tighter after the crash Less lending when more was needed If the Fed had lowered interest rates, the Depression MIGHT have been easier*

IV. Deeper in debt Congress passed the Hawley-Smoot tariff in 1930 Very high tariff Meant to make Americans buy US goods Makes other countries stop buying our goods Less profit and the spiral continues*

V. Government reaction US gov’t had always been pretty laissez-faire Wait and the economy will fix itself Hoover actually asked business owners to not lower wages or layoff workers Lower demand made this not possible “Prosperity is just around the corner.” Bonus Army WWI vets march to DC to get a bonus to be paid in 1941 US Army disbands them*

VI. Dust Bowl The Great Plains are damaged by: Overgrazing Overplanting Drought Top soil dries up and blows away Darkens the sky along east coast Creates migrant workers Many “Okies” move to California for work*

VII. Daily life Unemployment rate reached 25% No unemployment insurance People lose homes and farms Hobos hop on trains to travel to find work Live in shantytowns called Hoovervilles Those with jobs have wages cut Demand drops farther*

VII. Daily life Runs on banks Charities try to help People go to the bank to get their money out People who are late get no money b/c it is already gone Charities try to help Too many poor and not enough money*

VII. Daily life Families are hit hard Marriages are delayed Birth rates fall Men often abandoned Unemployed men lose status and wife and kids go get any work to survive*