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					The Great Depression
Economic Troubles on the Horizon
   Both consumers and farmers were going
    into deep debt.
   Key industries were struggling to make a
    profit.
   Mining, and timber were no longer in high
    demand.
   Housing sales began to fall leading to a
    trickle down effect.
Buying on credit

   Keeping up with the Joneses. Even though
    Americans appeared to be prosperous they
    were in fact living beyond their means.
   Easy Credit: Credit during the 20’s was so
    easy to come by and many businesses
    encouraged consumers to buy products
    using installment plans. People began
    having trouble making payments.
Uneven Distribution of Wealth
   During the 20’s the rich got richer while the
    poor got poorer.
   By 1920-1929 income of the wealthiest
    rose by 75%, while income as a whole rose
    only 9%!
   The unequal distribution meant that most
    Americans could not fully participate in the
    prosperity of the 1920’s.
Election of 1928

   Herbert Hoover (Republican): Personable
    and was able to point to years of prosperity
    amongst Republican leadership
   Alfred Smith: Democratic challenger to
    Hoover.
   Hoover easily won. Most Americans happy
    under Republican leadership.
Stock Market 101
   Companies need money to operate.
   The Public buys “shares” in the company. At a
    later date they can unload their shares on
    someone else in exchange for a profit.
   More times than not the public does not have that
    kind of money. To get started a lot of people will
    borrow money from the bank.
       Pros: You can make a lot of money
       Cons: it’s risky
Economic Disaster Around the Corner
   By 1929 most Americans oblivious to what lay
    ahead.
   Dow Jones Industrial Average: Most widely used
    barometer of the market.
   By 1929 4 million Americans owned stock.
   Speculation: buying stocks and bonds on the
    chance of a quick profit, while ignoring the risks.
   Buying on Margin: Only paying for a fraction of the
    stock out of pocket while borrowing the rest.
Black Tuesday
   Stock prices peaked in
    September of 1929 and
    began to decline.
   Panicked investors began
    to unload their shares.
   October 29, 1929: Record
    16.4 million shares sold
    that day!
   $14 billion just
    evaporated! By the end of
    the week $30 billion lost!
Market did not recover its pre
   1929 levels until 1954!
Bank and Business Failures
   Stock market crash signaled the beginning
    of the Great Depression.
   Bank runs: After the crash people panicked
    and began withdrawing money from the
    banks.
   Because a lot of banks had their money in
    the stock market, many did not have
    enough cash to give out to their depositors.
Bank Run
Let’s Do the Numbers

   By the end of 1929, 600 banks closed. By
    1933, 11,000 of the nations 25,000 banks
    had failed.
   Because the government did not insure or
    protect bank accounts, millions of people
    lost their savings.
Unemployment

   In 1929, unemployment was at 3%. By
    1933, it had jumped to 25% (not counting
    those who still had work, but were under
    employed).
It Wasn’t Just America
   Europe was still trying to make payments on WWI
    debt. They relied heavily on Americans buying
    their goods. This trade relationship all but
    stopped. Germany was hit the hardest.
   Hawley-Smoot Tariff Act: Designed to protect
    American farmers and manufactures from foreign
    competition. Did not work.
   Many countries retaliated by raising own tariffs.
    Within a few years, world trade had fallen by 40%.
Shantytowns (Hoovervilles)
Men wander the streets looking for
             work
Women struggle to survive
Soup Kitchens
The Dust Bowl
   Severe drought that
    plagued the Great
    Plains in the 1930’s.
   Plagued by dust
    storms and evictions,
    many farmers left and
    headed on route 66 to
    California.
   Known as “Okies”
Hoover’s Response
   After crash, tried to reassure the nation,
    “Any lack of confidence in the economic
    future is foolish”.
   At first opposed any form of public welfare.
   Later he tried to use the government to
    provide relief.
       Public works programs (Boulder Dam)
       Federal Home Loan Bank Act
Boulder Dam
   Later called Hoover Dam
   Construction of a dam on the Colorado River.
    Financed the project by using the profits from the
    sales of the electric power the dam would
    generate.
   In addition to providing electricity, it would provide
    water supply, which enable growth in California’s
    massive agriculture economy.
Federal Home Loan Bank Act
   With re-election looming, Hoover appealed to
    Congress for bank reform.
   In 1932, signed into law the Federal Home Loan
    Bank Act, which lowered mortgage rates and
    allowed farmers to refinance their farm loans to
    avoid foreclosure.
   Reconstruction Finance Corporation: Authorized
    $2 billion for emergency financing for banks, life
    insurance companies, railroads, and other large
    businesses.
Bonus Army
   In the spring of 1932, between 10,000 and 20,000
    World War I veterans arrived in Washington D.C.
   Came to support the Patman Bill which was under
    debate in Congress.
   Patman Bill (approved in 1924) authorized
    government to pay a bonus to WWI veterans who
    were not adequately compensated during the war.
    This bonus was to be paid out in 1945.
   Congressman Patman believed should be paid
    now!
Hoover’s Reaction
   Hoover Did not
    support Patman Bill,
    believed the marchers
    were not really
    veterans but criminals.
   Group became violent
    when the bill was
    struck down. Hoover
    sent in troops to
    disband the veterans.
Hoover’s Image
Election of 1932
What about Today?
   Some people call it the Great Recession
   Has lasted longer than previous recessions
    in 70’s and 80’s.
   Officially began in 2007; some economist
    argue it is over.
What is a Recession?
   A period of time in
    which the economy
    slows down, people
    lose their jobs, and
    consumers cut back on
    buying products.
         Why won’t it be another
             Depression?
   We learned our lesson….there are more
    safeguards in place.
   Unemployment insurance, Social Security
    payments and larger government at the
    federal, state and local levels keep money
    flowing into the economy even as
    consumers and businesses pull back on
    their own spending.
   Federal Reserve has pumped money into
    the system with lending programs.
   During Great Depression, lending of money
    was tightened.
   But….household and government debt,
    unemployment hurts.
Culture of the 1930’s
   Movies
   Radio
   Boxing
   Art
   Literature

				
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