1. Great Depression

2. Warnings of an unsound economy
Uneven prosperity

3. 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

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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

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

14. Natural Disasters
Dust Bowls
Great Flood of 1936

15. 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

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

17. 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