1. Chapter 14 Section 1 Notes The Great Depression

2. What Are The Causes?

3. Agricultural Problems in 1920s (biggest cause) During WWI
farmers had high demand
U.S. and W. Europe Govs.
Made good $, didn’t save it
Farmers actually borrowed $
Bought more land & equipment
Thought it would last forever
After WWI
Demand slowed a lot
W. Europe planted crops again.
U.S. Gov. stops buying food
Excess Supply of crops
Prices were cut in half
farm income cut in half
can’t pay off loans to banks
lose land and equipment.
Banks in rural areas begin to fail.
All the workers during WWI
Auctioning off barn
and equipment after WWI

4. Congress tries to help farmers
McNary - Haugen bill (proposed help… but never happens)
price supports
Gov. would guarantee farmers that they would buy any extra crops at a set price and try to sell them or use them.
President Coolidge vetoed this twice – doesn’t happen.
Doesn’t believe in direct government help to people that make bad decisions on their own
Bottom Line
Farmers never experience “Roaring 20s”
“Farmers never have made money.
I don't believe we can do much about it.
But of course we should be doing something;
do the best we can and without much hope.
The life of the farmer has its compensations
but it has always been one of hardship”
President Calvin Coolidge

5. Industry Problems in 1920s Bottom Line = Jobs start going away
Older businesses didn’t profit as much
Includes Railroads, Textiles, Coal Mining, Lumber
higher costs
Labor and energy
less demand
new competition
increased durability of
existing consumer products.
New businesses slow
after initial demand dried up
Automobiles
One car is enough
They were built to last!
New House construction decreased
Bottom Line = Jobs start going away

6. Consumer Problems in 1920s Less $ to spend on goods and services
Due to Industry and Farm Problems
Unemployment began to increase
People living “good lives”, but mainly because of credit
The bills started adding up

7. Uneven Distribution of Income in the 1920s rich got richer
wealthiest 1% of the country
increased income by 75%
poor got poorer
Other 99% of the country
increased income by 9%.
After adjusted for inflation
avg. income decreased!
70% (most) of the public
lived below poverty level.
Especially minorities
couldn’t afford simple things
Electricity, Furnace, Clothes
Only 1 in 10 people had a
fridge

8. 1928 Election Herbert Hoover (Republican) Alfred E. Smith (Democrat)
In Coolidge’s Cabinet
Never ran a campaign before
Has endorsement of Coolidge
Alfred E. Smith (Democrat)
Popular Governor of NY
Good personality
Hoover won easily
People wanted “Roaring 20’s” to continue

9. Stock Market in the 1920s Becomes popular way to invest $
Dow Jones Industrial Avg.
measures how well the economy
is doing by tracking the progress
of 30 major company stocks from
different areas
it quadrupled in 5 years!
80% interest earned per year
people began buying on margin
using credit to purchase stock
hoping the value increases.
Speculation
Belief you can get rich quick
Works well when prices go up
What happens when they go down?

10. The Great Depression Begins
Step 1: Stock Market begins to decline (Sept. 1929)
Black Tuesday (October 29th)
record amount of stock traded.
Everyone wanted to sell, prices fell drastically
Investors that had bought on margin owed $$$
By mid November, $30 billion had disappeared

11. People that had $ in banks wanted to take it out.
Step 2: Banks fail
People that had $ in banks wanted to take it out.
People that owed $ to banks couldn’t afford to pay.
Many banks had $ invested in the stock market.
that $ was no longer worth as much.
All of the above caused around half the banks in U.S. to
close within 5 years.
People lost millions of dollars.
$ was not insured by the Govt. back then

13. People could not afford to buy products.
Step 3: Businesses Fail
People could not afford to buy products.
Businesses laid off employees due to low demand
Unemployment rose from 3% (early 1929) to 25% (end of 1933)
Ordinary workers that kept jobs often had to take pay cuts
Overall production in factories decreased by about 50%

14. Global Depression
Depression occurred in Europe too. Earlier than in U.S.
Time and $$$ spent rebuilding after WWI
Germany couldn’t afford to pay war debts
U.S wasn’t buying European goods. WHY?
Hawley - Smoot Tariff
established highest tariff in history on imports to U.S
tried to help out U.S. business by preventing competition
it actually hurt U.S. businesses. WHY?
foreign countries stopped
buying U.S. products
Global trade down 40%