The Great Depression by hedongchenchen


									Causes of The
         Unit 6

    Great Depression Causes
          #1 Overproduction of Goods
       The rate of industrial and agricultural production achieved during WWI
                  couldn't possibly be sustained during peacetime.

• Glut:  excess accumulation of goods
• Supply > Demand
   –   Excess Inventory of Goods
   –   Consumers Buy Less
   –   Workers Laid off
   –   A number of key industries, such as steel, textiles, and railroads barely made a
• Falling Agricultural Prices
   – Perhaps more than any other part of the economy, agriculture suffered in the
   – During WWI, international Demand (D) for crops = Rising prices (P)
   – Farmers had taken out loans in order to plant more crops and buy more land &
   – After WWI, D for farm products fell
   – Decline in crop prices by 50% or more.
   – To compensate, farmers produced more in the hope of selling more crops, but
     this only made prices drop further.
   – Farmers who had gone into debt couldn't pay off loans
   – Many small, rural banks began to fail.
#2 -The economy depended heavily on
         only a few industries.
The Automobile and housing construction industries fueled the economic boom of the 1920's.
   When the market for cars & houses began to dry up, the entire economy was affected.

Housing                                             Automobiles
–Building                                           –Motels
 materials                                          –Materials (rubber,
–New furnishings                                     steel)
–New equipment                                      –Roads
–New appliances                                     –Gas stations
–Jobs in                                            –Restaurants
           #3 Living on Credit
Many Americans were living beyond their means during the 1920's
                     by buying on credit.

Installment plan
   •When people began to have trouble paying off debts,
     they cut back on spending
   •People using credit to live beyond their means =
   consumers buy less
> Workers laid off
> Fewer goods sold
> Excess inventory >>> Glut
# 4 Uneven Distribution of Income
•Between 1920 & 1929, the income of the
  wealthiest 1% of the pop rose by 75%
  compared with a 9% increase for
  Americans as a whole.
• Unequal distribution of income = Most
  Americans could NOT buy goods brought
  about by the technological advances of the
 #5 The Stock Market Crash of 1929
                     October 29, 1929 ~ Black Tuesday
  – > Banking institutions that permitted unsound investments in stocks and
  – Insufficient legal controls in stock exchanges
  – Speculators -people who bought stocks and bonds on the chance they
    might make a quick or large profit, ignoring the risks. Speculators were
    able to buy stocks on margin far beyond their ability to pay.
  – Margin -paying a small % of the stock's price as a down payment and
    borrowing the rest (EASY CREDIT). Stockholders were willing to lend
    buyers up to 75% of a stock's purchase price.
  – In early September, 1929, stock prices peaked, then began to fall. As a
    result, confidence in the market began to waiver. Investors began pulling
    out of the market by selling their stocks. This made the price of stocks
    drop even more.
  – On Black Tuesday, the bottom completely fell out of the market (it laid
    and egg). People and corporations frantically tried to sell their stocks
    before prices plunged even
• The individual investors who had bought stocks on margin
  acquired huge debts as prices fell.
• The rush on the stock market produced the following cycle:
  > Speculators who couldn't pay off their loans went bankrupt
  > Loss of jobs
  > D for goods dropped
  > Overstocked factories closed
• Financial Collapse
  > After the crash, many Americans panicked and rushed to the
  withdraw their $ from banks.
  > Many banks couldn't cover their customers withdrawals
  because they had invested in the stock market and lost $ just
  as individuals had.
• Result
  By 1933, around 6,000 banks - 1/4 of the nations total - failed.
  > The government didn't insure bank accounts, so these bank
  failures wiped out around 9 million peoples' savings accounts.
  > People who went to the bank to retrieve their savings came
  home with nothing.
  > Many people were forced to live in shantytowns called
  "Hoovervilles" after president Hoover.
       Economic Crisis

Look at the pictures and
read the captions. Write
  some notes on each.
#1 Billboard depicting American prosperity,
   displayed in run-down, barren area.

In this slide we see a billboard extolling America as the land of the world‟s
highest standard of living. Ironically, the billboard is in a location that does
not reflect that. The 1920‟s was a decade of seeming prosperity, yet there
                  were many significant economic problems.
#2 “Fishing on Wall Street”
     political cartoon.

               In this slide we see a
                  political cartoon
                showing Wall Street
               “hooking” Americans
                 to invest in stocks
                through speculation
                and buying stock on
 #3 Bank customers rush to get
  money out of a failing bank.

 In this slide we see a group of depositors standing outside the
Union Bank in New York in April 1933, hoping that this bank would
   not join others in the epidemic of bank failures of that year.
•To increase efficiency, farmers during the 1920‟s bought expensive machinery and
fertilizers, and thus were often in debt. The efforts at efficiency worked so well that there
was an overabundance of production, and farm prices fell.
•Severe dust storms in the early and mid-1930‟s ruined crops and forced many hungry
farmers to abandon their farms.
•Farm problems had tremendous national implications, as about one-third of Americans
at this time were farmers.
•Between 1930 and 1934 one million families lost their farms. Many of those families
moved west in search of jobs and in hopes of eventually buying fertile farmland.
•“The houses were left vacant on the land, and the land was vacant because of this.
Only the tractor sheds of corrugated iron, silver and gleaming, were alive. . .The doors of
the empty houses swung open, and drifted back and forth in the wind. Bands of little
boys came out from the towns to break the windows and to pick over the debris, looking
for treasures. . .The weeds sprang up in front of the doorstep, where they had not been
allowed, and grass grew up through the porch boards. . .Splits started up the sheathing
from the rusted nails. A dust settled on the floors. . .“ (The Grapes of Wrath, p. 157-159)
•“Maybe we can start again, in the new rich land-in California, where the fruit grows.
We‟ll start over. But you can‟t start. Only a baby can start. You and me-why, we‟re all
that‟s been. . .This land, this red land, is us; and the flood years and the dust years and
the drought years are us. We can‟t start again.‟~ (The Grapes of Wrath, p. 119)
#5 Unemployed man sells apples for five cents.

    In this slide we see a New Yorker selling apples on a street
                 corner. Note how well dressed he is.
•In the beginning of the Depression,
unemployed workers could expect little or no
help from the government.
•Many unemployed persons who had faith in
the economic system tried relentlessly to
create business successes.
•The level of individual desperation created by
the Depression was symbolized by the apple
sellers, many of whom lost life savings in
failed banks.
#6 Unemployed
 man with a sign
pleading for a job.

   In this slide we see a man
    on a Detroit street with a
     sign explaining that he
wants work, not charity. This
illustrates the work ethic and
the value our society placed
  on self-reliance during this
•By 1932 unemployment in the United States
had reached about 25%.
•To be unemployed sapped individual self-
worth, especially in this era. As a result, most
of the unemployed went to great lengths to try
to get a job.
•Thousands of businesses had failed, and
those that were operating usually were
struggling and not hiring.
•Many unemployed men left their families to
roam the land seeking work.
#7 Americans line up to receive free food.

    In this slide we see people in Huntington, Pennsylvania, lining
      up to receive “Federal Surplus Commodities.” This process
         was commonly referred to as standing in a bread line.
• Bread lines were established
to feed the hungry.
• Most who accepted handouts
felt shame, humiliation, and
• Hundreds of thousands were
forced by poverty and hunger to
accept charity.
 #8 Unemployed steelworkers on edge
 of “Hooverville” huddling by ash can fire
           at Christmas time.

In this slide we
 see a photo of
    outside a
   shack they
    for winter
•Throughout the early 1930’s “Hoovervilles”
sprung up in most major cities.
•Increasing unemployment, low wages, and
business and bank failures contributed to the
growing number of homeless people in the
•“Hoovervilles” were so named because many
believed that President Herbert Hoover did
not do enough to help the poor.
•The homeless built shacks out of such things
as tin, cardboard, and orange crates; some
even lived in condemned buildings or
abandoned railroad boxcars.
#9 President Hoover in the Oval
     Office with advisors.

                         In this slide
                            we see
                         Hoover with
                         political and
                         advisors in
                           the Oval
•Hoover’s Republican advisors initially believed that
depression was an inevitable part of the economic cycle, and
thus not cause for serious concern.
•In 1930 Hoover attempted to restore people’s faith in the
economy and urged business leaders not to panic by cutting
•Hoover opposed direct relief action by the federal
government but urged a massive relief effort by private
charities and volunteer organizations.
•In late 1931 Hoover pushed for the creation of the
Reconstruction Finance Corporation, which was designed to
make loans to banks and other businesses. The bill was
passed by Congress in 1932.
•Hoover’s popularity diminished as the Depression wore on,
and, rightly or wrongly, he became a scapegoat for the misery
created by the Depression.
        #10 F.D.R. rides in a campaign
            rally in October, 1932.
  In this slide we
 see F.D.R. riding
in the backseat of
   a car during a
 campaign rally in
   Indianapolis a
 month before the
 1932 presidential
 election. A crowd
     cheers and
      waves; a
   banner reads,
  “Abolish Bread
  Lines. Vote For
•The Democratic Party chose Roosevelt largely due
to his name recognition and the successful relief
plan he had created for the unemployed as governor
of New York.
•Roosevelt, in contrast to Hoover, pledged to take
“bold, persistent” action to try to combat the
problems of the Depression.
•Roosevelt gained support from city dwellers,
farmers, immigrants, and the working class as he
promised America “a new deal.”
•Roosevelt loved campaigning, and, unlike Hoover’s,
his crowds were adoring.
•In the 1932 presidential election, Roosevelt won
580/0 of the popular vote and 472 out of the 531
#11 Political cartoon of confident F.D.R. and
  haggard Hoover on Christmas Eve, 1932.
                                 In this slide we see a
                                   political cartoon of
                                      F.D.R. saying
                                confidently to a worn-
                                   out Hoover, “Just
                                leave„em, Herb. I‟ll do
                                    it all after March
                                  fourth.” On Hoover
                                      desk are such
                                   problems as debt
                                    settlement, farm
                                      relief, and the
                                  forgotten man. The
                                      caption reads,
                                     “Christmas Eve
Throughout the 1932 election campaign,
F.D.R. radiated charm and confidence.
Despite the economic calamity the
nation faced, he voiced optimism and
promise for the nation.
As a lame-duck, Hoover urged F.D.R. to
carry out certain policies that he deemed
essential. F.D.R., who rejected Hoover’s
economic policies, refused. So strained
was their relationship that they barely
spoke to one another on inauguration

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