Transcript October 9—How is your current economic situation similar and

Read the article and take notes on
the following:
Causes of the stock market crash
 Public reaction
 Broker’s reactions
 Government’s response
 Optimism about rebuilding of stock market
and aiding investors
 Speculated short-term and long-term
economic effects
 Speculated political and social effects

October 11—How is our current
economic situation similar and
different to what occurred during
the Great Depression?
The Great Depression
vs. The Great Recession
Stock Market Crash-1929
October 28—DOW dropped 13%
 October 29 (Black Tuesday)—it plunged
12% more.
 Over the next 3 years, the US stock
market declined 89%.
 The index didn’t regain its 1929 peak until
1954.

Stock Market Crash-1929
Stock Market

http://www.google.com/finance?client=ob
&q=INDEXDJX:DJI
Purchasing Power
During Great Depression deflation was the
major issue.
 2010 estimated inflation = 1.6%

Purchasing Power
1929—More than half of US families lived on
the edge of or below the minimum
subsistence level
 Poverty rate in 2009 =14.3% which is 43.6
million Americans
 2008 = 13.2 percent, up from 12.5 percent
in 2007.
 There were 39.8 million people in poverty in
2008, up from 37.3 million in 2007.

Purchasing Power
As of 2008, Household debt increased from
about 50% of the GDP in 1980 to a peak of
100% in 2006. Households owe as much as
the entire US economy can produce in a
year.
 Household income dropped 9.8% from
December 2007 to June 2011. Income
dropped more after the recession officially
ended in June 2009.
 Income dropped 3.2% Dec 2007-June 2009

Purchasing Power—Source: NY
Times
US Poverty Thresholds
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One person--$10,590
Under 65 years-$10,787
65 years and over-$9,944
Two people--$13,540
Householder under 65
years--$13,954
Householder 65 years
and over--$12,550
Three people--$16,530
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Four people--$21,203
Five people--$25,080
Six people--$28,323
Seven people--$32,233
Eight people--$35,816
Nine people or more-$42,739
Income inequality—
http://motherjones.com/politics/2011/0
2/income-inequality-in-america-chartgraph
Income inequality
Income Inequality
A Harvard business prof and a behavioral economist recently
asked more than 5,000 Americans how they thought wealth is
distributed in the United States. Most thought that it’s more
balanced than it actually is. Asked to choose their ideal
distribution of wealth, 92% picked one that was even more
equitable.
Income inequality
US International Trade
1929—Demand for US goods declines
 2008—Our number one export is our debt.
We sell $700 billion of our debt a year to
foreigners.

http://www.usdebtclock.org/
 US Debt = 62.3% of GDP as of 2010

US Trade
As of December 2008, U.S. exports of
goods and services grew by 12.0% in
2008 to $1.84 trillion, while imports
increased 7.4% to $2.52 trillion.
 Exports comprised 13.1% of U.S. GDP in
2008. To put in historical terms, exports
were 9.5% of U.S. GDP five years earlier
(2003), and 5.3% 40 years ago (1968).

US Exports
Credit Structure
1929-US allies could not pay their debt
because Germany and Austria could not pay
the reparations and the US was not willing to
forgive or reduce the debt.
 About 4 million homes have been repossessed
since 2006.
 4.2 million loans are currently delinquent. It
would take 4 years for the market to absorb
those houses.

Home Foreclosures
2008
2010
Tariffs
1929—Protective Tariffs
 Today—Free trade

International Economy
Great Depression--European banks began
to fail in 1931. Germany had high
inflation.
 2008—Stocks plunge in Europe and Asia.
Tokyo market falls 9.4% on October 8
which is its worse decline since the 1987
crash.
 2009—Much like the US, international
stock markets have stabilized.

International Economy Today
European Union debt, especially PIIGS
(Portugal, Ireland, Italy, Greece and
Spain)
 http://www.economist.com/node/1583802
9
 Japanese earthquake and tsunami
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Bank Failures during Great
Depression
Bank failures Today
By 2007 the financial sector’s debt was
equivalent to 116% of the GDP, compared
with a mere 21% in 1980.
 To date, US banks have admitted to $334
billion in losses and write-downs. They were
able to raise $235 billion in new capital but
that is still a $99 billion net loss.
 140 banks failed as in 2009
 156 banks failed in 2010
 74 banks failed in 2011 as of September
2011.

Interest Rates during the Great
Depression
Interest Rates Today
Since the credit crunch began in August 2007,
Bernanke has repeatedly cut the federal funds rate
from 5.25% down to an effective rate at one point
last week of about 0.25%.
 The Federal Reserve has pumped about $1.1 trillion
into the financial system in the past 13 months.
 Fed said it would leave the interest rate at 0.25% for
“an extended period.”
 Policy makers also announced that they would
stretch out the Fed’s program to buy up almost $1.5
trillion worth of mortgage-related securities through
the end of March. That program is aimed at keeping
mortgage rates low and propping up the housing
market.

US GNP
Gross National Product = an economic
statistic that include GDP plus any income
earned by residents from overseas
investments minus income made by
overseas residents
 1929—plummeted from over $104 billion
to $76.4 billion in 1932
 Today- $13.13 trillion

US GNP
US Unemployment
25% of US workforce was unemployed by
1932 and it never dropped below 15% the
rest of the decade.
 US unemployment rate as of August 2008
is 6.1%.
 US unemployment rate as of August 2009
is 9.7%.
 US unemployment rate as of August 2011
is 9.1%
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US unemployment during Great
Depression
US Unemployment during Great
Recession
The average length of time a person who
lost a job was unemployed increased to
24.1 weeks in June 2009, from 16.6
weeks in December 2007, according to the
federal Bureau of Labor Statistics.
 Since the end of the recession, that figure
has continued to increase, reaching 40.5
weeks in September, the longest in more
than 60 years.
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US unemployment during Great
Recession
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http://www.google.com/publicdata/explor
e?ds=z1ebjpgk2654c1_&met_y=unemploy
ment_rate&tdim=true&fdim_y=seasonalit
y:S&dl=en&hl=en&q=us+unemployment+
rate#ctype=l&strail=false&nselm=h&met_
y=unemployment_rate&fdim_y=seasonalit
y:S&scale_y=lin&ind_y=false&rdim=state
&ifdim=state&tdim=true&hl=en&dl=en
Make a venn diagram comparing
the Great Depression and the
current recession. Use this
discussion and notes from class.
How did the Great Depression
affect African Americans?
They experience more unemployment,
homelessness, malnutrition, and disease
than they had in the past and more than
whites experience.
 More than half still lived in the South, but
approx. 400,000 moved to the North.
 2 million, half the African American
population of the US—were on some
form of relief by 1932.
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How did the Great Depression
affect Latinos?

Approx. half a million Latinos left the US
for Mexico in the first few years of the
Great Depression.
How did the Great Depression
affect women?
By the end of the Depression, 25% more
women were working than had been at
the beginning.
 Black women suffered massive
unemployment because of the decline in
domestic service jobs.
 As many as half of all African American
women lost their jobs in the 1930s.

UN p. 753-760
Herbert Hoover
 Agricultural Marketing Act
 Hawley-Smoot Tariff
 International financial panic of the spring
of 1931
 Reconstruction Finance Corporation (RFC)
 “Bonus Army”

AP p. 795-801
Election of 1932
 Emergency Banking Relief Act of 1933
 Glass-Steagall Banking Reform Act

UN Ch 26
UN 761-774
 Emergency Banking Act
 Economy Act
 Glass-Steagall Act
 Agricultural Adjustment
Act
 National Industry
Recovery Act
 Tennessee Valley
Authority
 Federal Emergency Relief
Administration (FERA)
UN p. 775-789
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Second New Deal
National Labor Relations
Act
Social Security Act
Works Progress
Administration (WPA)
“Court-packing plan”
Recession of 1937
Limits and legacies of
New Deal
Fair Labor Standards Act