Great Depression

Warnings of an unsound economy Uneven prosperity

uneven dist. of wealth 0.1% at top owned as much as bottom 42% of American families (42% below poverty line) of the 58% above the poverty line, most fell into the middle class category - they were not wealthy; they had jobs b/c of the industrialization & consumerization of the American market place this middle class depended on their salaries and when productivity declined they lost their jobs and b/c of low savings, they had to cut back on their purchases this decline in consumption among the middle class ruined the whole country

Buying with credit Playing the stock market Overproduction and under-consumption Trouble for farmers Trouble for workers

The stock market: the public invests in co. by purchasing stocks; in return for this they expect a profit b/c of booming 1920's economy, $ were plentiful, so banks were quick to make loans to investors also investors only had to pay for 10% of the stock's actual value at time of purchase this was known as BUYING ON MARGIN, and the balance was paid at a later date

this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck b/c of all this buying & selling, stock value increased (Ex: G.E stock $130  $396/share) this quick turnover didn't aid cos.  they needed long term investments so they could pay bills (stock value was like an illusion) unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value all of this gave a false sense of security/confidence in the American market

Stock Market Purpose: business owners sell portions (shares) of their companies to investors. High today=higher tomorrow Buy as much as possible Buying on margin No way to repay (decline) Speculation Mass selling

Banks People deposit banks make loans to stockbrokers stockbrokers loan money to individual investors individual investors unable to sell stocks Unable to pay back money

Black Tuesday Sept 1929: stock prices peak then decline People begin to sell Tuesday October 29: bottom fell out of stock market Signaled beginning of Great Depression

beginning in Oct. 1929, investors’ confidence dropped, leading to a market collapse all tried to sell at once and bottom fell out of market = panic selling… (many bankruptcies as banks called in loans) only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy

Hawley- Smoot Tariff Europe also affected by crash US no longer buy imports Congress passed law to protect Amer businesses from foreign competition by raising tariff on all imports Europe raised tariff on all US imports Caused slump in economyin

Causes of Great Depression Tariffs and war debt polices that cut down the foreign market for Amer goods Crisis in the farm sector Availability of easy credit Unequal distribution of wealth

American Families Unemployment African Americans/Latinos Women Men Suicide Children Marriage/Birth Rate Soup Kitchens/Bread Lines

Natural Disasters Dust Bowls Great Flood of 1936

Herbert Hoover - believed that the economy should be allowed to function with minimal intervention Govt should not take care of its’ people, but people should take care of themselves People against Hoover b/c felt he caused depression and not helping situation Hoovervilles

Hoover Cont Boulder Dam Federal Home Loan Bank Act Reconstruction Finance Corporation

Bonus Army Pay WWI soldiers everyday they served during war Govt not pay until 1945 Vets wanted/needed money now Congress didn’t pass Patman Bill Vets refused to leave; Hoover ordered their removal