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					      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
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 was the barometer
         of the Stock Market’s worth
       • The Dow is a measure
         based on the price of 30
         large firms
       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
           THE 1929 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 October 29,
1929, now known
as Black Tuesday,
the bottom fell out
16.4 million
shares were sold
that day – prices
plummeted
People who had
bought on margin
(credit) were stuck
with huge debts
  WALL
 STREET
 ON THE
 DAY OF
  THE
 CRASH,
OCTOBER
  1929
The "Era of Get Rich Quick" was over.
In a single day, sixteen million shares
were traded--a record--and thirty
billion dollars vanished into thin air.
Westinghouse lost two thirds of its
September value. DuPont dropped
seventy points.
Jack Dempsey, America's first
millionaire athlete, lost $3 million.
Cynical New York hotel clerks asked
incoming guests, "You want a room
for sleeping or jumping?"
What happened?
The 1920s were a
prosperous time
but the prosperity
was not equally
shared
Many people
bought new
products with the
installment plan
People were
investing in the
stock market
By mid-November, investors
 had lost about $30 billion
Reasons for the Stock Market Crash




       Where Did the Money Go?
1.Speculation
 As stock prices rose, more people
 began to speculate
 Practice of making high risk
 investments in hopes of making a huge
 profit
 People bought shares of stock they
 thought would rise in value quickly
 After the price went up, they would sell
 the stock for a profit
2. Buying on the Margin
 Practice allowed investors to purchase
 stock by paying a down payment or small
 percentage of the stock’s price (10 to 50%)
 and borrowing the rest of the cost of the
 stock from the stockbroker
 Broker held the shares of stock as collateral
 As long as the stock prices rose, the
 investor could sell the stock at a high price,
 pay off the loan & still make a profit
 If the value of the stock dropped, the
investor either had to come up with the
rest of the money to pay the stock broker
for the loan or the stock broker sold the
stock
With easy money available to investors,
buying and selling of stock fueled the
market spiral upward
3. Monetary Policy – Easy Money
  Banks made money readily available at
 low interest rates to more and more
 people, who used the money to buy
 stocks
 Banks loaned stockbrokers up to 75%
 of the stock purchases
 When the crash hit, stock brokers could
 not repay the bank loans
 Banks lost depositors savings
4. Lack of Stock Market Regulation
  a. There were no guidelines on
 the buying and selling of stock
 b. Corporations printed more
 stock and investors bought the
 stock on the margin
  Black Thursday, October 24, 1929
• Prices in the stock market started to decline
bringing about a panic at the New York Stock
Exchange
• 13 million shares of stock were traded
• As stock prices dropped, brokers put out
margin calls
• If the investor couldn’t pay for the stock, the
broker sold the stock and the investor lost the
entire savings
Black Tuesday, October 29, 1929
        October 25, 1929record 16.4
                       A
                            million shares
• A group of bankers, such as J.P.
                            of stock were
Morgan, pooled their money to buy the
                            sold causing a
stocks to stop the panic and restore
                            collapse of the
confidence in the stock market
                            stock market

                             Cost
                            investors $30
                            billion
The Great Depression
   THE GREAT DEPRESSION
                                             • The Stock Market
                                               crash signaled the
                                               beginning of the Great
                                               Depression
                                             • The crash alone did
                                               not cause the Great
                                               Depression, but it
                                               hastened its arrival

Alabama family, 1938 Photo by Walter Evans
THE GREAT DEPRESSION
Great Depression
was a severe
economic decline
that lasted from
1929 until the US
entered WWII in
1941.
It is characterized
by heavy
unemployment
     CAUSES OF THE GREAT
         DEPRESSION
•Overproduction of         • Tariffs & war debt
Industry & Agriculture       policies

                           • Easy credit
•Under Consumption
U.S. demand low, despite
factories producing more   • Unequal distribution
                             of income
                           • Psychological
•Over Speculation            Causes, Pessimism
            Economic Causes
1. Overproduction
 a. Factories & industries produced more
 goods than they could sell
 Electric assembly line increased
 productivity
 Eventually factories reduced production
 which resulted in workers being laid off
.
      OVERPRODUCTION IN INDUSTRY
       FACTORIES WERE PRODUCING PRODUCTS BUT
    WAGES WERE NOT RISING FAST ENOUGH. TOO FEW
      WORKERS COULD AFFORD TO BUY THE FACTORY
     OUTPUT. THE SURPLUS PRODUCTS COULD NOT BE
    SOLD OVERSEAS DUE TO HIGH TARIFFS AND LACK OF
                  MONEY IN EUROPE.
b. Farmers produced more food than
  they could sell, which caused food
  prices to decline
 Farm income dropped
DECLINE IN FARM PRICES IMPACTED
        FARMER’S INCOME
    FARM OVERPRODUCTION


 IN 1929 THE AVERAGE ANNUAL
   INCOME FOR AN AMERICAN
FAMILY WAS $750, BUT FOR FARM
FAMILIES IT WAS ONLY $273. THE
PROBLEMS IN THE AGRICULTURAL
  SECTOR HAD A LARGE IMPACT
SINCE 30% OF AMERICANS STILL
       LIVED ON FARMS.
2. Under consumption
 Purchasing power of the American
 consumer was not great enough to
 buy all of the good being produced
 - consumers lacked sufficient income
 - workers & farmers incomes lagged
 behind
 - foreign countries were unable to
 purchase American products because
 of tariffs, war debts, and reparations
3. Over speculation
 More and more people were
 speculating on the stock market
 speculation – practice of making high
 risk investments with the idea of selling
 stock when its value rose in hopes of
 making a profit
 Stock market boom was based on
 borrowed money and optimism instead
 of real value
4. Protective Tariffs Hurt Trade
   Protectionists imposed trade barriers on
  imports in hopes of increasing demand for
  American goods at home and to raise
  revenue from tariffs
   High tariffs, such as the Hawley Smoot tariff
  in the 1830s kept European countries from
  selling their products in the US, which
  lessened their ability to buy American
  products
 European countries imposed their trade
 barriers against US products
     HIGH TARIFFS AND WAR DEBTS
AT THE END OF WORLD WAR ONE, EUROPEAN NATIONS OWED
 OVER $10 BILLION ($115 BILLION IN 2002 DOLLARS) TO
THEIR FORMER ALLY, THE UNITED STATES. THEIR ECONOMIES
 HAD BEEN DEVASTATED BY WAR AND THEY HAD NO WAY OF
                PAYING THE MONEY BACK.
  THE U.S. INSISTED THAT THEIR FORMER ALLIES PAY THE
MONEY. THIS FORCED THE ALLIES TO DEMAND GERMANY PAY
 THE REPARATIONS IMPOSED ON HER AS A RESULT OF THE
   TREATY OF VERSAILLES. ALL OF THIS LATER LED TO A
 FINANCIAL CRISIS WHEN EUROPE COULD NOT PURCHASE
 GOODS FROM THE U.S. THIS DEBT CONTRIBUTED TO THE
                  GREAT DEPRESSION.
  IN 1922 THE U.S. PASSED THE FORDNEY-MC CUMBER ACT
     WHICH INSTITUTED HIGH TARIFFS ON INDUSTRIAL
PRODUCTS. OTHER NATIONS SOON RETALIATED AND WORLD
      TRADE DECLINED HELPING BRING ON THE GREAT
                      DEPRESSION.
5. Unequal Distribution of Wealth & Income
 Despite rising wages in the 1920s, income
 distribution was unequal
  1% of the population had incomes 650%
 greater than the 11% at the bottom. Same
 1% controlled 34% of the savings
  71% of families earned less than $2,500 a
 year; 80% had no savings
  Economy dependent on the spending &
 investments of the wealthy, who either saved
 or invested their money. This meant less
 real spending
90

85

80

                                       income
75

70

65
         1923           1929

     TOTAL REALIZED INCOME ROSE FROM 74.3
      BILLION IN 1923 TO 89 BILLION IN 1929
80
70
60
50                                          TOP .01%
40                                          BOTTOM 42%
30                                          TOP 1%
                                            BOTTOM 99%
20
10
 0
                  1929
THE CHART ABOVE SHOWS THAT IN 1929 THE TOP 1/10TH OF 1 % OF THE
  POPULATION EARNED AS MUCH MONEY AS THE BOTTOM 42% OF THE
 POPULATION. THE SECOND TWO BARS SHOW THAT THE TOP 1% OF THE
POPULATION SAW A 75% INCREASE IN THEIR INCOME WHILE THE OTHER
   99% SAW ONLY A 9% INCREASE IN THEIR INCOME IN THE 1920’S.
RURAL POVERTY IN THE 1920’S
CHART SHOWING WAGES OF UNSKILLED WORKERS.
NOTICE HOW LITTLE THE WAGES CHANGED DURING
   THE SUPPOSED PROSPERITY OF THE 1920’S
 700



 600



 500



 400



 300



 200



 100



  0
       1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941
Psychological Causes – Pessimism
Hopelessness and loss of confidence
affected the American people
Consumers refrained from buying
Businesses limited expansion
Banks restricted loans
25% of the nation’s workers were
unemployed
      Causes of the Depression
    Demand             Fewer goods       People lose
     drops.              are sold.        their jobs.


   In order to
stay in business     The Spiral       Even more people
 companies cut           Of          Lose their confidence
      wages                          And spend less money
                     Depression
People lose their
  confidence &          Demand         Companies are
start saving their     drops even     forced to cut costs
      money              further.    by laying people off
HERBERT HOOVER ELECTED
    PRESIDENT, 1928

              "We in America today are
             nearer to the final triumph
           over poverty than ever before
           in the history of any land. The
            poorhouse is vanishing from
                  among us.“ 1928


            HERBERT HOOVER
           RAN ON A PLATFORM
             OF CONTINUED
              PROSPERITY
Brother, Can You Spare a Dime," lyrics by Yip Harburg, music by Gorney
Harburg (1931)

    They used to tell me I was building a dream, and so I followed the mob,
    When there was earth to plow, or guns to bear, I was always there right on the
    job.
    They used to tell me I was building a dream, with peace and glory ahead,
    Why should I be standing in line, just waiting for bread?

    Once I built a railroad, I made it run, made it race against time.
    Once I built a railroad; now it's done. Brother, can you spare a dime?
    Once I built a tower, up to the sun, brick, and rivet, and lime;
    Once I built a tower, now it's done. Brother, can you spare a dime?
        Once in khaki suits, gee we looked swell,
        Full of that Yankee Doodly Dum,
        Half a million boots went slogging through Hell,
        And I was the kid with the drum!
    Say, don't you remember, they called me Al; it was Al all the time.
    Why don't you remember, I'm your pal? Buddy, can you spare a dime?
        Once in khaki suits, gee we looked swell,
        Full of that Yankee Doodly Dum,
        Half a million boots went slogging through Hell,
        And I was the kid with the drum!
    Say, don't you remember, they called me Al; it was Al all the time.
    Say, don't you remember, I'm your pal? Buddy, can you spare a dime?
    GNP DROPS,
UNEMPLOYMENT SOARS
         • Between 1928-1932, 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
 THE DEPRESSION CAUSED A DRAMATIC DROP IN
INCOME AND SAVINGS (IN BILLIONS OF DOLLARS)

50
45
                                     personal and
40                                    corporate
35                                     savings
30
25
20                                            1929
15                                            1933
10
 5
 0
     privately earned personal and
         income        corporate
    EFFECT OF DEPRESSION ON
CONSUMER SPENDING FROM 1929 T0
  1933 IN BILLIONS OF DOLLARS
20
18
16
14
12
10                                              1929
 8                                              1933
 6
 4
 2
 0
     FOOD   HOUSING CLOTHING   AUTO   MEDICAL
     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 1929- 600 banks fail
• By 1933 – 11,000 of the
  25,000 banks nationwide     Bank run 1929, Los Angeles
  had collapsed
Runs on banks
Unemployed Men, unable to find jobs
and wondering how to feed their families
          HARDSHIPS DURING
            DEPRESSION
• The Great Depression
  brought hardship,
  homelessness, and
  hunger to millions
• Across the country,
  people lost their jobs,
  and their homes
• Some built makeshifts
  shacks out of scrap
  material
• Before long whole
  shantytowns (sometimes
  called Hoovervilles in
  mock reference to the
  president) sprung up
Homeless
“Hoovervilles”, homeless
        camps
Unemployed workers in front of a shack with Christmas tree,
East 12th Street, New York City. December 1937.. Tattered
communities of the homeless coalesced in and around every
major city
  SOUP KITCHENS

                                       • One of the common
                                         features of urban
                                         areas during the era
                                         were soup kitchens
                                         and bread lines
                                       • Soup kitchens and
                                         bread lines offered
                                         free or low-cost food
Unemployed men wait in line for food
                                         for people
 – this particular soup kitchen was
      sponsored by Al Capone
                               HOBOES
                               TRAVEL
• The 1930s created the term   AMERICA
  ―hoboes‖ to describe poor
  drifters
• 300,000 transients – or
  hoboes – hitched rides
  around the country on
  trains and slept under
  bridges (thousands were
  teenagers)
• Injuries and death was
  common on railroad
  property; over 50,000
  people were hurt or killed
Man in hobo
jungle
killing turtle
to make
soup,
Minneapolis
, Minnesota.
Sept. 1939
Selling apples, Jacksonville, Texas. October, 1939.. Many
tried apple-selling to avoid the shame of panhandling. In New
York City, there were over 5,000 apple sellers on the street.
     RURAL LIFE DURING THE
         DEPRESSION

                                     • While the Depression
                                       was difficult for
                                       everyone, farmers did
                                       have one advantage; they
                                       could grow food for their
                                       families
                                     • Thousands of farmers,
                                       however, lost their land
                                     • Many turned to tenant
Between 1929-1932 almost ½ million
      farmers lost their land          farming and barely
                                       scraped out a living
7
            FARM INCOME IN
6             BILLIONS OF
                DOLLARS
5
4
3                   FARM INCO

2
1
0
    1929   1932
MANY FARMERS LOST THEIR FARMS. BELOW IS ONE
 OF THOUSANDS OF FARM FORECLOSURE SALES.
Tenant farms
Homeless family, tenant farmers
      THE DUST BOWL
• A severe drought
  gripped the Great
  Plains in the early
  1930s
• Wind scattered the
  topsoil, exposing
  sand and grit
• The resulting dust
  traveled hundreds of
  miles
• One storm in 1934
  picked up millions of
  tons of dust from the
  Plains an carried it to
  the East Coast            Kansas Farmer, 1933
Poor agricultural practices and years of
sustained drought caused the Dust Bowl.
Plains grasslands had been deeply plowed
and planted to wheat., the But as the droughts
of the early 1930s deepened, the farmers kept
plowing and planting and nothing would grow.
The ground cover that held the soil in place
was gone. The Plains winds whipped across
the fields raising billowing clouds of dust to
the skies. The skies could darken for days,
and even the most well sealed homes could
have a thick layer of dust on furniture. In
some places the dust would drift like snow,
covering farmsteads.
For eight years dust blew on the
southern plains. It came in a
yellowish-brown haze from the South
and in rolling walls of black from the
North. The simplest acts of life —
breathing, eating a meal, taking a walk
— were no longer simple. Children
wore dust masks to and from school,
women hung wet sheets over
windows in a futile attempt to stop the
dirt, farmers watched helplessly as
their crops blew away.
Dust storm approaching Stratford, Texas - 1934
Farmer and sons, dust storm, Cimarron
County, Oklahoma, 1936..
Dust buried cars and wagons in South Dakota
                   in 1936
HARDEST HIT REGIONS

                                • Kansas, Oklahoma,
                                  Texas, New Mexico,
                                  and Colorado were
                                  the hardest hit
                                  regions during the
                                  Dust Bowl
                                • Many farmers
                                  migrated to
                                  California and other
Boy covers his mouth to avoid     Pacific Coast states
         dust, 1935
Sometimes
the struggle
to maintain
one’s
dignity was
almost more
than a
human
being could
manage
Refugee camp
Migrant pea pickers camp in the rain. California,
February, 1936. Photographer: Dorothea Lange.
In one of the largest pea camps in California. February,
1936. Photographer: Dorothea Lange.
Migrant Mother
Dorothea Lange's "Migrant Mother,"
destitute in a pea picker's camp,
because of the failure of the early
pea crop. She had just sold the tires
off her car in order to buy food. Most
of the 2,500 people in this camp
were destitute. By the end of the
decade there were still 4 million
migrants on the road.
EFFECTS OF DEPRESSION
          • Suicide rate rose more
            than 30% between 1928-
            1932
          • Alcoholism rose sharply in
            urban areas
          • Three times as many
            people were admitted to
            state mental hospitals as
            in normal times
          • Many people showed great
            kindness to strangers
          • Additionally, many people
            developed habits of
            savings & thriftiness
                               BONUS
                               ARMY
• A 1932 incident further
  damaged Hoover’s image
• That spring about 15,000
  World War I vets arrived
  in Washington to support
  a proposed bill
• The Patman Bill would
  have authorized Congress
  to pay a bonus to WWI
  vets immediately
• The bonus was scheduled
  to be paid in 1945 --- The
  Army vets wanted it NOW
BONUS MARCHERS RALLY AT THE
       CAPITOL STEPS
SOME BONUS MARCHERS BROUGHT THEIR FAMILIES
   BONUS ARMY
  TURNED DOWN
                                   • Hoover called
                                     the Bonus
                                     marchers,
                                     ―Communists
                                     and criminals‖
                                   • On June 17,
                                     1932 the Senate
                                     voted down the
                                     Putnam Bill
Thousands of Bonus Army soldiers
      protest – Spring 1932
PRESIDENT HOOVER SENT THE ARMY TO
   DISPERSE THE BONUS MARCHERS
 AMERICANS SHOCKED AT
 TREATMENT OF WWI VETS




• MacArthur’s 12th infantry gassed more than 1,000
  marchers, including an 11-month old baby, who died
• Two vets were shot and scores injured
• Americans were outraged and once again, Hoover’s
  image suffered
BONUS MARCHERS
 SET UP CAMP IN
WASHINGTON D.C.
  ONE VETERAN WAS KILLED, FIFTY PROTESTORS AND SOME
POLICE OFFICERS WERE INJURED. THE MARCHERS DISPERSED.
  THERE WAS ANOTHER SMALLER MARCH IN THE NEXT YEAR.
   PRESIDENT HOOVER WAS WIDELY CRITICIZED FOR HIS
              HANDLING OF THE SITUATION.




                                              SHACKS
                                              OF THE
                                              BONUS
                                               ARMY
                                               AFTER
                                               THEY
                                               WERE
                                              FORCED
                                                OUT
                      HOOVER
                  STRUGGLES WITH
                  THE DEPRESSION
• After the stock market
  crash, President
  Hoover tried to
  reassure Americans
• He said, ―Any lack of
  confidence in the
  economic future . . . Is
  foolish‖
• He recommended              Herbert
                              Hoover
  business as usual
   HOOVER’S PHILOSOPHY
                                                • Hoover was not quick to
                                                  react to the depression
                                                • He believed in ―rugged
                                                  individualism‖ – the idea
                                                  that people succeed
                                                  through their own efforts
                                                • People should take care of
                                                  themselves, not depend on
                                                  governmental hand-outs
                                                • He said people should
                                                  ―pull themselves up by
Hoover believed it was the individuals job to
take care of themselves, not the governments      their bootstraps‖
HOOVER TAKES ACTION:
 TOO LITTLE TOO LATE
                                   • Hoover gradually softened his
                                     position on government
                                     intervention in the economy
                                   • He created the Federal Farm
                                     Board to help farmers
                                   • He also created the National
                                     Credit Organization that
                                     helped smaller banks
                                   • His Federal Home Loan Bank
                                     Act and Reconstruction
                                     Finance Corp were two
                                     measures enacted to protect
Hoover’s flurry of activity came     people’s homes and
too late to save the economy or      businesses
              his job
•RUGGED INDIVIDUALISM
•VOLUNTARY ACTIONS TO HELP
THE ECONOMY
RELIEF SHOULD COME FROM
PRIVATE CHARITIES
•THE BONUS MARCH
RECONSTRUCTION FINANCE CORPORATION
               (RFC)
                     THE RECONSTRUCTION
                    FINANCE CORPORATION,
                   POPULARLY KNOWN AS THE
                   RFC, WAS ESTABLISHED IN
                        1932 UNDER THE
                       SPONSORSHIP OF
                    PRESIDENT HOOVER AND
                     EXPANDED DURING THE
                      ADMINISTRATION OF
                   FRANKLIN ROOSEVELT. THE
                  CORPORATION MADE LOANS
                     TO BANKS, INSURANCE
                        COMPANIES, AND
                  INDUSTRIAL CORPORATIONS
                    AS A WAY OF RESTORING
                   CREDIT DURING THE GREAT
                         DEPRESSION.
HOOVER RELIEF AND GOVERNMENT “MAKE
   WORK” CONSTRUCTION PROJECTS




                  CONSTRUCTION OF THE
                  HOOVER DAM IN NEVADA
                   EMPLOYED THOUSANDS
                     WHO NEEDED JOBS
              THE ELECTION OF 1932


500

400                                            ROOSEVELT
                                               HOOVER
                                               OTHER
300
                            ROOSEVELT
200                         HOOVER

100                            POPULAR VOTE

 0
       ROOSEVELT   HOOVER
                                ALMOST 57% OF THE
      ELECTORAL VOTES FOR       ELECTORATE VOTED
        EACH CANDIDATE
Hoover had little chance to be re-elected in 1932
THE CHART SHOWS THE DROP IN NATIONAL INCOME
  (IN BILLIONS OF DOLLARS) AS A RESULT OF THE
STOCK MARKET CRASH AND THE GREAT DEPRESSION

                   national income

      100

      80

      60

      40

      20

       0
            1929    1931     1932    1933

				
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