1. THE GREAT DEPRESSION BEGINS SECTION 1:
THE GREAT DEPRESSION BEGINS SECTION 1:
Photos by photographer Dorothea Lange

2. Learning Objectives: Section 1 - The Nation's Sick Economy
1. Summarize the critical problems threatening the American economy in the late 1920s. 2. Describe the causes of the stock market crash and Great Depression. 3. Explain how the Great Depression affected the economy in the United States and throughout the world.

3. 
To curb the financial loss of farmers, Congress tried to pass the McNary-Haugen bill, which would mandate price support on key crops

4. Young Hoover supporter in 1928

5. 
HOOVER WINS 1928 ELECTION
Republican Herbert Hoover ran against and defeated Democrat Alfred E. Smith in the 1928 election
Hoover emphasized years of prosperity under Republican administrations
Hoover won an overwhelming victory

7. THE NATION’S SICK ECONOMY
As the 1920s advanced, serious problems threatened the economy while
Important industries struggled, including:
Agriculture
Railroads
Textiles
Steel
Mining
Lumber
Automobiles
Housing
Consumer goods

8. Chapter 14: Section 1 MAIN IDEA QUESTIONS
A – What industrial weakness signaled a declining economy in the 1920’s?
The older industries such as textiles, steel, and railroads, which were basic to the fundamental well-being of the economy, were barely profitable.

9. FARMERS STRUGGLE No industry suffered as much as agriculture
During World War I European demand for American crops soared
After the war demand plummeted
Farmers increased production sending prices further downward
Photo by Dorothea Lange

10. CONSUMER SPENDING DOWN
By the late 1920s, American consumers were buying less
Rising prices, stagnant wages and overbuying on credit were to blame
Most people did not have the money to buy the flood of goods factories produced

11. Chapter 14: Section 1 MAIN IDEA QUESTIONS
B – What did the experience of farmers and consumers at this time suggest about the health of the economy?
Beneath the surface prosperity of the 1920’s, the economy was in trouble.

12. The Stock Market’s bubble was about to break
SEEDS OF TROUBLE
Too many Americans were engaged in
speculation – buying stocks & bonds hoping for a quick profit
Americans were
buying “on margin” – paying a small percentage of a stock’s price as a down payment and borrowing the rest
buying getting easy “credit” – Consumers agree to pay later for purchases. Installment plan.
The Stock Market’s bubble was about to break

13. Chapter 14: Section 1 MAIN IDEA QUESTIONS
C – How did speculation and margin buying cause stock prices to rise?
They caused over investment as people ignored the risk and bought more than they could pay.

14. GNP DROPS, UNEMPLOYMENT SOARS
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
90,000 businesses went bankrupt
Unemployment leaped from 3% in 1929 to 25% in 1933

15. THE STOCK MARKET 
By 1929, many Americans were invested in the Stock Market
The Stock Market had become the most visible symbol of a prosperous American economy
The Dow Jones Industrial Average measures the stock markets health
The Dow is a measure based on the price of 30 large firms

16. STOCK PRICES RISE THROUGH THE 1920s
Through most of the 1920s, stock prices rose steadily
The Dow reached a high in 1929 of 381 points (300 points higher than 1924)
By 1929, 4 million Americans owned stocks
New York Stock Exchange

17.  THE Stock market CRASH
In September the Stock Market had some unusual up & down movements
On October 24, the market took a plunge . . .the worst was yet to come
On Tuesday, October 29, the stock market crashed known as Black Tuesday
6.4 million shares were sold that day – prices plummeted
People who had bought on margin (credit) were stuck with huge debts

18. By mid-November, investors had lost about $30 billion

19. Alabama family, 1938 Photo by Walter Evans
THE GREAT DEPRESSION
The Stock Market crash signaled the beginning of the Great Depression
The Great Depression is generally defined as the period from 1929 – 1940 in which the economy plummeted and unemployment skyrocketed
The crash alone did not cause the Great Depression, but it hastened its arrival
Alabama family, 1938 Photo by Walter Evans

20. Chapter 14: Section 1 MAIN IDEA QUESTIONS
D – What happened to the ordinary workers during the Great Depression?
Many were out of a job.
Others experienced pay cuts and reduced hours.

21. World Depression
The U.S. was not the only country gripped by the Great Depression
Much of Europe suffered throughout the 1920s

22. 
HAWLEY-SMOOT TARIFF
In 1930, Congress passed the toughest tariff in U.S. history called the Hawley- Smoot Tariff
It was meant to reduced the flow of goods in the U.S. and prevented other countries from earning US currency.
Other countries enacted their own tariffs and soon world trade fell 40%

23. Chapter 14: Section 1 MAIN IDEA QUESTIONS
E – How did the Great Depression affect the world economy?
World trade dropped, causing unemployment to rise globally.

24. Chapter Review SECTION 1
How did what happened to farmers during the 1920’s foreshadow events of the Great Depression?
Farm prices fell and farmers compensated by boosting production.
Farmers were not able to purchase their share of America’s output

25. Chapter Review SECTION 1
Chapter Review SECTION 1
What were some of the effects of the stock market crash in October 1929?
The Stock Market crashed on Tuesday October 29, 1929 and caused panic and fear across the country
Marked the beginning of the Great Depression.

26. FINANCIAL COLLAPSE
After the crash, many Americans panicked and withdrew their money from banks
Banks had invested in the Stock Market and lost money
In banks fail
By 1933 – 11,000 of the 25,000 banks nationwide had collapsed
Bank run 1929, Los Angeles

27. Chapter 14: Section 1 Guided Reading:
Describe the serious problems in the Industry area of the economy that helped cause the Great Depression.
Key industries barely made a profit;
Some lost business to foreign competition and new technologies;
Some suffered from declining demand after WWI
Coal declined due to new sources of energy
New housing starts declined – affecting related businesses.

28. Chapter 14: Section 1 Guided Reading:
Chapter 14: Section 1 Guided Reading:
Describe the serious problems in the Agriculture area of the economy that helped cause the Great Depression.
After WWI demand for products fell as did prices;
Farmers could not pay debts and lost farms – causing rural banks to fail;
Congresses passed supports for farm products – but President Coolidge vetoed them.

29. Chapter 14: Section 1 Guided Reading:
Describe the serious problems in the Consumer spending area of the economy that helped cause the Great Depression.
Making credit available, businesses encouraged Americans to pile up a large consumer debt;
Faced with rising prices, stagnant wages, and high levels of debt, consumers decreased their buying.

30. Photo by Dorothea Lange
GAP BETWEEN RICH & POOR
The gap between rich and poor widened
The wealthiest 1% saw their income rise 75%
The rest of the population saw an increase of only 9%
More than 70% of American families earned less than $2500 per year
Photo by Dorothea Lange

31. Chapter 14: Section 1 Guided Reading:
Describe the serious problems in the Distribution of wealth area of the economy that helped cause the Great Depression.
Nearly half of Americans earned less than the minimum amount needed for a decent standard of living.
This unequal distribution meant most consumers had too little money to buy American goods.

32. CAUSES OF THE GREAT DEPRESSION
CAUSES OF THE GREAT DEPRESSION
Farm sector crisis
Too much easy credit
Tariffs policies
U.S. demand low, despite factories producing more
Unequal distribution of income

33. Chapter 14: Section 1 Guided Reading:
Describe the serious problems in the stock market area of the economy that helped cause the Great Depression.
Many investors engaged in speculation and buying on margin, fueling the market upward and generating great wealth, but only on paper;
When the market crashed, many investors lost their life savings.

34. Chapter 14: Review
How did what happened to farmers during the 1920’s foreshadow events of the Great Depression?
Farm prices fell and farmers compensated by boosting production.
Farmers were not able to purchase their share of America’s output

35. Chapter 14: Review
What were some of the effects of the stock market crash in October 1929?
The crash of 1929 caused panic and fear across the country and
marked the beginning of the Great Depression.