 Depression: Unemployed: The Unemployed Union: marchers south on Broadway: Camden New Jersey typical scene reflecting large population of unemployed in desperate need of work and looking for jobs. (Circa 1935)

Section 1 Causes of the Depression

RRepublican Herbert Hoover ran against Democrat Alfred E. Smith in the 1928 election HHoover emphasized years of prosperity under Republican administrations HHoover won an overwhelming victory

RRural farmers produced huge surpluses of food that depressed prices. FFarmers could not afford to buy goods or repay their loans.

WWhile factory workers’ wages rose 8%, factory output increased by 32%. AAs a result, worker incomes rose modestly, while rich investor incomes skyrocketed

EEasy credit and installment buying lead people to purchase goods they can’t pay for. BBy 1929, Americans racked up more than $6 billion in personal debt — more than double the 1921 level.

- What is Wall Street? - Why do people buy stocks and shares?

- Wall Street is where all the stocks and shares of every kind can be bought and sold.

The main reason people buy stocks and shares are because they think that what they invest would multiply and they would gain a lot of income. =

 Until September 1929, the stock market continued to rise.  Many people borrowed money to buy stock, assuming prices would continue to go up. - They would then make more money and then would return it.  Some economists feared that stocks were over- priced  STOCK MARKET HANDOUT

- In 1929, Wall Street crashes -On October 29 th, the stock market went into a free fall as investors tried to sell at any price. - prices plunge - By mid Nov. stockholders lose $30 billion - stock losses exceed cost of US involvement in WWI

American Can182 cents86 cents Anaconda Copper162 cents70 cents Electric Bond and Share204 cents50 cents General Electric396 cents168 cents General Motors182 cents36 cents New York Central256 cents160 cents Radio505 cents28 cents United States Steel279 cents150 cents Westinghouse E&M313 cents102 cents Woolworth251 cents52 cents Companies 3 rd September 13. Nov

The stock market crash didn’t start the Great Depression,it merely hastened (sped up) its arrival.

In growth periods, workers are hired, wages rise, and demand for products increases. In contraction periods, workers are fired, wages drop, and demand for products falls. The Great Crash was a hallmark of the nation’s business cycle. The economy periodically grows and then contracts.

 The Great Depression is generally defined as the period from 1929 – 1940 in which the economy plummeted and unemployment skyrocketed

AAfter the crash, many Americans panicked and withdrew their money from banks BBanks had invested in the Stock Market and lost money IIn banks fail BBy 1933 – 11,000 of the 25,000 banks nationwide had collapsed

Many people lost their life savings. Banking System Breakdown When the stock market crashed, people could not repay their loans to the bank. Therefore, banks couldn’t give depositors their money and banks closed.

BBetween , the U.S. Gross National Product (GNP) – the total output of a nation’s goods & services – fell nearly 50% from $104 billion to $59 billion 990,000 businesses went bankrupt UUnemployment leaped from 3% in 1929 to 25% in 1933

TThe U.S. was not the only country gripped by the Great Depression MMuch of Europe suffered throughout the 1920s IIn 1930, Congress passed the toughest tariff (tax on imports) in U.S. history called the Hawley- Smoot Tariff

 It was meant to protect U.S. industry yet had the opposite effect  Other countries enacted their own tariffs and soon world trade fell 40%

 As international trade falls, a global drop in business leads to a worldwide depression.

TTariffs & war debt policies UU.S. demand low, despite factories producing more FFarm sector crisis EEasy credit UUnequal distribution of income