The Great Depression Section 11.1: The Causes of the Great Depression (Appleby )

Agenda for Today Great Depression Slide Show Presentations Monday (Bonus Army & Lindberg) Homework –Finish Letter to parents

Write a caption for this picture. –Who is she? –What is going on in the picture? –What is she thinking about?

The Causes of the Great Depression Treaty of Versailles Frederick Taylor’s Scientific Management of Business Harding promised “Normalcy Buying on Credit Henry Ford’s Assembly Line Hoover Elected President Laissez-Faire Coolidge: The business of America is business Stock Market Crashes Industrial Productivity Soars

Objectives At the end of this lesson you should be able to: Define the Great Crash of 1929 and list at least 3 causes Define the Great Depression and list 4 causes

The Roaring Twenties The Roaring Twenties was characterized by a booming economy, a laissez-faire government, the rise of jazz, flapper girls, speakeasies, organized crime and a general disregard for tradition. But then came …

Fast forward to 1933

What happened to America? The Crash of 1929

Describe the Bull Market of the late 1920s. Stock Market –place where shares (stocks) of corporations or bonds (IOUs) are sold to investors Bull Market of the 20s –stock prices continuously rose during 20s –Attracted many inexperienced investors to risk their savings in stock market 10% of Americans owned stock by 1929 Buying on Margin –Practice of the 20s where investors borrowed money from stockbroker to buy more stock Speculation –Some investors “gambled” their money in the stock market –Ignored the true value of the stock and bought it hoping the bull market would continue

What was the Great Crash? A massive drop in the value of stocks of corporations sold on the New York Stock exchange Known as Black Tuesday-October 29, 1929 Dow Jones Industrial Stocks lost $15 billion of their value –Dow average value of 30 publically owned “blue chip” stocks Considered a “thermometer” measuring the health of the economy Crash considered beginning of the Great Depression Click for Clip

Let’s Review Why were the 20’s called the Roaring 20s? –The economy grew at rapid pace Why did it roar? –Laissez-faire government –New production techniques –Credit Describe the risky behavior of investing in the Stock Market during the 20s’s. –Buying on Margin –Speculation What happened in Oct. 1929? –Stock Market crashed –Value of shares of corporations sharply dropped Answer

How did the Crash affect Banks? Banks engaged in risky business behavior –loaned 6 billion to stock speculators –Invested savings deposits in Stock Market Crash –Caused speculators to default –Lost savings of depositors Banks –began to cut back of giving loans to legitimate business Greatly reduced business activity –Many banks began to close Depositors lost all of their savings Bank Run –Panicked depositors rushed to the banks to withdraw their money before the bank closed –10% of banks in US collapsed by 1932

What was the Great Depression? Great Depression –period of severely reduced economic activity from October of 1929 to 1939 –Characterized by high unemployment, agricultural disaster, and a general loss of hope of achieving the American Dream –Began with the Stock Market Crash of 1929 –Ended in 1939 with start of WWII

The Crash of ‘29

What were the causes of the Great Depression? Uneven Distribution of Income –Businesses overproduced during the 20s Industrial productivity soared –Rose 32% during 20s –Workers wages remained low Only rose 8% –2, 500 = avg. annual income could not afford to buy enough products –Reduced consumer spending led businesses to lay off workers –Led to Vicious cycle Decline in foreign trade –Hawley-Smoot TariffHawley-Smoot Tariff Raised taxes in imports to record levels Wanted to protect American business But lead to a sharp decline in foreign trade Mistakes of the Federal Reserve –Failed to curb risky inventing during 20s by keeping interest rates low –When Depression came it raised interest rates Made it harder for businesses to do business 0:54-6:18 Sales Decline Businesses layoff workers Consumers spend less

Ticket Out 10 points Pretend that you’re a immigrant who came to this country during the Industrial Revolution. You just received a letter from your worried parents back home. Write a letter to them in which you explain the causes of “The Crash” and your reaction to it. –Remember it’s circa Include at least 3 specific content-oriented details Due Monday