Transcript PPT- The Great Depression

The Great Depression
CHAPTER 14
Prosperity Shattered
SECTION 1
The 1920s
The Roaring 20s appeared to be a decade of
unlimited economic prosperity in the US
Stock Market
 Investors poured millions into the market
 Stock prices rose as demand rose
 Market Analysts argued -no chance for market to
down turn
Credit
 Interest rates low
 Republicans - easy credit policy promoted business
 Major concern of economists … credit owed could
cripple consumers
 Most ignored warnings
Speculation
 “Playing” the market by buying and selling to turn a
quick profit
 Ignoring the risks
 The higher the risk the higher the profit
Bulls and Bears
 Bull Market~ one with an upward trend in stock
prices
 Bear Market~ one with a downward trend in the
stock market
 Video: How the Stock Market works
https://www.youtube.com/watch?v=GnJCOof2HJk
Buying on Margin
 Borrow from your broker to purchase the stock
 The shares are the collateral
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Collateral is the security or guarantee that you will pay back your
loan
 Borrower agrees to pay the Broker what was borrowed
plus the interest they’ve charged
 The Borrower has to keep a % of the equity of the stock in
account
 Extremely risky
Stock Market Crash
Black Thursday
Black Tuesday
 October 24, 1929
 October 29, 1929
 Interest rates began to
 Brokers called in
rise
 16 million shares
“dumped” (sold)
 Stock prices fell
drastically
 Caused Panic
margins
 Many investors ruined
 Average stock value
lost 50%
 $30 billion lost
What caused the Great Depression?
The Stock Market Crash provoked the
banking crisis and business failures, even
destroyed individual fortunes but it did not
cause the Great Depression.
1st – Bank Failures
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Banks were independent and unregulated
Banks played the stock market with consumer deposits
Large banks also loaned huge amounts to stock brokers
Banks closed when borrowers defaulted on their loans
A default is the failure to pay back a loan
 >5,000 banks failed between ‘30 and ’32
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Example: The Bank of NY closed and 400,000 depositors lost their
money
 People lost their entire life savings !
 Even though only a small percentage of Americans had
invested in the Stock Market the impact hit the entire
country
2nd - Business Failures
 Credit dried up
 Consumers were unable or unwilling to buy
 Production cut back causing layoffs
 Depression accelerated as companies failed
Gross National Product
 GNP~ total number of goods and services in a year
1929 ~$103 billion
1933 ~ $56 billion
Business Cycles
 Some economists argued : the 30s were a part of the
regular ups and downs of business in a free
enterprise economy
 Others argued: better financial planning in the 20s
could have avoided the crash
 Length and Severity of the Great Depression went far
beyond normal business cycles
Business Cycle
 Strength of the Economic Activity of our country
Phases Within a Business Cycle
 Recession (Rc): a slow-down in the economy for
two consecutive quarters or 6 months in a row.
People become nervous and cautious.
 Depression (D): a severe & prolonged slow-down
or “break-down” in the economy. People react
with fear and panic
 Recovery (Ry): active economic growth for two
consecutive quarters or 6 months following a
recession or depression. People become optimistic.
 Prosperity (P): an extended period of economic
growth. People develop trust and confidence in
the economy.
 Capitalism is a market economy driven by the laws
of supply and demand.
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Advertising and human needs/wants create the demand.
Manufacturers/producers create the supply hoping to
achieve high profits.
If demand is high prices /profits go up. (Ipads)
If demand is low prices / profits go down. (PS2)
3rd - Income Gap
 Unequal distribution of wealth
Controls
Number of Americans
Distribution of Wealth
Some Americans bridged the gap by using credit
4th - American Economic Policy with Europe
 Smoot –Hawley Tariff, 1930 designed to protect American
markets from cheap imports. Highest tariff passed in US
history
 Goal: Protect American farmers and manufacturers
 Backfired: Foreign nations began boycotting American goods
 Worldwide trade declined by 40%
 American industries stuck with huge inventories
 Caused layoffs
Unemployment
3 out of 4 men were out of work
Unemployment Rate in 1929 ~ 3%
1932 ~ 24%
The Great Depression will last in this country until the
start of WWII.
By the end of 1929, stock losses exceeded the
total coast of US involvement in WWI!
($180 Billion= $1.3 Trillion today)
Hard Times
SECTION 2
Joblessness
 1929, 1.5 Million unemployed
 1933 15 Million unemployed
 Some areas were as high as 75-80%
 Those lucky enough to keep their jobs had a drastic
decrease in wages
 Immigration to the United States actually decreased
Christmas Dinner: Turnips and cabbage
Pattern of Layoffs
 People of color were always laid off first
 White immigrants were laid off next
 Part time workers were then laid off
 Full time workers were given part time work
 Shifts were cut from multiple shifts to just one
 Production was cut to a few days a week then
finally
 The construction site, plant or mine closed
Discrimination
 A Chicago study stated that black men “should not
work as long as there white men without work”
 Most domestic servants were African American
women
 Many laid off during the depression
 “Bronx Slave Market” African American women who
stood on the corner to try to get work for the day
Women
 Employers could hire women more cheaply than men
 % in workforce actually increased during the 30s
 Women’s jobs typically did not close
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Domestic servants
clerical work
department store sales ladies
“There are 10,000,000 people out of work in the United States today.
There are also some 10,000,000 or more women, married, and
single, who are jobholders. Simply fire the women who shouldn’t be
working anyway, and hire the men. Presto! No unemployment. No
relief rolls. No Depression.“
Norman Cousins, Editor, Saturday Review
Life in the City
 Hard life than in rural areas
 Federal government did little to nothing
 Local city governments, religious groups like the
Salvation Army and charity organizations like the
Red Cross provided relief
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Bread lines
Soup kitchens
 Many communities formed mutual aid societies
 Mexican Americans formed mutualistas
 Rent Parties
 Shantytowns
3 Types of Depression
 Financial~ loss of wages and income
 Physical ~ malnutrition, poor diets
 Mental~ emotional ~shame, hopelessness often
suicidal state
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Men equate their self esteem with the ability to keep a job,
work, and provide monetarily for their families
Women equate theirs with the ability to take care of their
families
Life on the Farm
 Increasing poverty made it impossible for people to
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even buy food
Prices took a nose-dive
Farmers often let fields rot rather than do the work
to harvest and still see the produce rot
Livestock slaughtered because no way to feed them
Many farms and homes were repossessed by the
banks because people could not pay the mortgages
Penny Auctions
 Repossessed farms usually auctioned by the banks to
try and recoup the loss
 Banks would take EVERYTHING! Clothing,
furniture, bedding, dishes etc.
 Neighbors would bond together to buy back items to
give to back to the previous owners
Tennant Farmers
 South was particularly hit hard by the Depression
 Crippling poverty was the norm before the Depression
 Cotton prices fell from 16¢ per lb. (1929) to 6¢ (1931)
 Tennant farmers who paid for their rent in shares of crop
like cotton were ruined
 Many forced off land that they had lived on all of their
lives
 Midwest farmers faced a glut of food
 Southern tenant farmers faced poverty and devastating
harvests
Migrant Farm Workers
 Traveled farm to farm to pick the harvests
 Mostly immigrants from Mexico
 Many local city governments ran them off as well as
Mexican Americans
 Some 500,000 were gathered up and forced back
across the border
Josefina Fierro de Bright
 Organized Mexican Americans that remained
 De Bright led a boycott of companies that did
business in Mexican American communities but
refused to hire Mexican Americans
 She started a radio program for Spanish speaking
audiences
 Encouraged bilingual education for migrant children
Family Life
 The Depression caused families to band together
 Economic hardship caused families to break apart
 Marriage and Birth rates fell dramatically
Popular Culture
Radio
 The 30s is considered the
Golden Age of Radio
 Number of radios
increased from 12 to 28
million
Movies
 Movies attendance soared
 Sound replaced silent films
 Low ticket prices, double
features, give aways
 gangster films, musicals, news
reels, historical, social-realism
films, lighthearted screwball
comedies, westerns and horror
Popular Culture
Movies
Radio
 Popular programs
Little Orphan Annie,
The Shadow, Lone
Ranger, baseball
games, football games
 Shirley Temple, Greta
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Garbo, Clark Gable, Joan
Crawford, Bela Lugosi
Gone with the Wind
Our Gang
Dracula
Frankenstein
Wizard of Oz
Popular Culture
Cartoons
 Walt Disney’s Mickey
Mouse and Donald
Duck
Literature
 Escape the harsh
reality of real life
 Chapter books popular
 Free public libraries in
some parts of the
country
Popular Culture
Cartoons
 Snow White and the
Seven Dwarfs
 Betty Boop
 Superman
Literature
 The Grapes of Wrath~
John Steinbeck
 Lost Horizon ~ James
Hilton
 Studs Lonigan~ James
T. Farrell
 The Sound and the
Fury~ William
Faulkner
Hoover’s Policies
SECTION 3
Hoover’s Policies
 Americans always look to the President for
leadership
 Despite the nation’s problems, Hoover remained
optimistic
“…a temporary halt in the prosperity of a great
people.”
~ Herbert Hoover
Free Enterprise Economy
 Prior to the Great Depression most Americans felt
that government should not interfere in everyday life
 Hoover decided that the way to recovery was through
individual effort
 The crisis worsened so quickly that Americans
demanded that the federal government provide
direct relief for food, clothing, shelter, and money
Letter to the President
“Why are we reduced to poverty and starving and
anxiety and Sorrow So quickly under your
administration as Chief Executor. Can you not find a
quicker way of Executing us than to starve us to
death.”
Hoover’s Response
“I do not believe that the power and duty of the
(federal) government ought to be extended to the
relief of individual suffering… The lesson should be
constantly enforced that though the people support
the Government, the Government should not
support the people.”
~ Herbert Hoover
Rugged Individualism
 People should not expect government help
 Opposed direct relief or “Public Assistance”
 Make sacrifices; Hoover led the way with a 20% cut
of his own salary
 Urged State and local government to provide relief
 Depressions are a local problem
 Local governments ask private charities should
provide assistance
Direct Relief According to Hoover
 Would cause the creation of a large bureaucracy
 Would inflate the federal budget
 Reduce the self respect of the individuals that receive
the aid
“…Americans should lift themselves up through hard
work and strength of character…”
~H.H.
Federal Emergency Relief Board
 $375 million for direct aid to the unemployed
 Opposed by Hoover
 14 votes shy to pass in February 1932
President’s Committee for Unemployment Relief
 Designed to assist state and local relief efforts
 Encouraged private individuals to donate to private
relief agencies
 Community Chest, Red Cross, Salvation Army, YMCA
 All PCUR did was to collect information about what
local agencies needed and pass it along to those
wealthy and middle class and urged them to donate
aid
Laissez-faire Economics
Hands off approach to government and business
Finally
 Several public works programs funded
 Contracts given to local companies for labor and
materials
 Hoped that these projects would stimulate the local
economy and reduce unemployment
 One of the largest projects was the construction of
Boulder Dam later named the Hoover Dam on the
Colorado River
 Hoover did finally approve $800 million public work
projects but it had little effect
Agricultural Marketing Act
 1929 Established the Federal Farm Board
 Hoover’s instructions “…find ways to help farmers
help themselves…”
 Offered loans and created cooperatives
 Example: Southern States
 Reduced farmers’ expenses by purchasing materials
equipment, fertilizers, feed, pesticides in bulk.
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Coordinate crop production region by region
Withhold crops from the market until the price rose
Home Loan Banking Act, 1932
 Established the Home Loan Bank Board
 Provided money to banks, building and loans, and
insurance companies
 Offer low interest mortgages
 Hoover thought that it would reduce foreclosures
and increase home construction
 Too little , too late
Trickle Down Economics
 Reconstruction Finance Corporation created by
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Congress in 1932 ~ Election move
Given $2 billion to stabilize banks, insurance
companies, railroad companies, etc.
The hope was to create jobs and reduce business
failures
RFC did help many corporations form collapsing
Money not authorized for small businesses that
continued to fail at an alarming rate
 Little was done to stop the landslide of the
Depression in the early years
 By the time that the election of 1932 rolled around
the few measures that Hoover and Congress finally
had taken had some impact
 Unfortunately these measures were not sufficient
enough to halt the downward trend
Federal Income Tax
 1929 cut the tax
 Made Little Difference
 Taxes were already low
 Average family saved $3.75 per year
Radical Political Parties
 The Communist Socialist Party gained an enormous
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amount of membership
Condemned Capitalism
Socialist leader A.J. Muste formed Unemployment
Leagues to demand work
Desperate Americans responded to the Communist
and Socialist calls for direct action
Hunger marches and rallies
Confrontations with police
Bonus Army
 Congress passed a Pension Bill in 1921 for WWI
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Veterans to be paid starting in 1945
10,000 WWI veterans and their families traveled to
DC (estimate 45,000)
Camped along the Potomac River
Veterans asked to be paid their Pension early
Congress rejected the request
Many left
Hoover ordered the federal army to force the rest to
leave
 Troops commanded by Generals Douglas MacArthur
and Dwight Eisenhower rolled tanks through the
veterans tents, hurled tear gas grenades
 Hundreds were injured
 Three died including an 11 week old baby
 Film footage and pictures shocked the nation
Franklin Delano Roosevelt
 Attacked Hoover’s miserable record
 Conveyed a genuine spirit of optimism vs. Hoover’s
seeming gloom
 Plan: New Deal for the American people
 Election of 1932 was a landslide
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FDR received 472 electoral votes
Hoover received just 59
 The Democratic Party won decisive victories in both
houses of Congress
Americans may have credited the Republican Party for
the Prosperity of the 20s but they also blamed them
for the Depression