Causes of the Great Depression by yaoyufang


									Causes of the Great
            Politics in the 1920s
•   Following, Harding and          • We will have more than what
    Coolidge, Herbert Hoover          you need (chickens) and more
    won the presidential election     than what you want (cars)
    of 1928 as the Republican
    candidate.                      • All republican presidents-
•   In 1928, Americans were still     promised prosperity for all
    wrapped up in the “roar” of
    the 1920s and expected
    everything to keep going
    strong in the economy.
    Hoover promised the
    American public that
    prosperity would continue
    into the 1930s.
•   “2 chickens in every pot and
    2 cars in every garage”
         Old McDonald had a…
•   During WWI, many farmers had      • **Since they couldn’t sell
    bought more land and
    machinery (and borrowed             their goods at a high
    money from the bank to do so)       price, they couldn’t pay
    to produce more crops to            their bills and went
    supply our troops.
•   After WWI, demand was not as
                                        deeper into debt.
    high, but farmers were still
    producing high amounts.
•   One industry that didn’t “roar”
    as well as others during the
    1920s was farming.
•   They produced more crops
    than they could sell. This
    meant there was a surplus of
    goods which caused the price
    to go down.
               Cause #1
• The majority of the people in America in
  the 20s had low incomes and little savings
  while a very small minority of the
  population was very wealthy. This is called
  an uneven distribution of wealth.
• The rich became much richer while the
  poor became less poor
• There weren’t enough Americans buying
  all of the goods we were producing
                Cause # 2
• A healthy economy needs a good balance of
  production and consumption. Leading up to
  the Great Depression, there was overproduction
  and under consumption.
• Too many Americans did not have enough
  money to buy what they needed or wanted
                  Cause # 3
• In the 1920s, a lot of
  Americans bought their
  frivolous “wants” in
  installments (credit)
  meaning they didn’t
  actually have the money.
• Americans spent more
  than what they
  had/made- they went into
• We were living beyond
  our means
Stock Market Crashes

The Spark that Starts the Great
                     Uh Ohhhh
•   Buying stock is risky        • A few people were
    because until you sell it,     worried that all of this
    there really isn’t any         prosperity would break
    money except on                but no one really listened
    paper.                         to the experts.
                                 • People kept buying and
                                   selling stock. The first
                                   sign of trouble was on
                                   Thursday, October 24,
                                   1929 when no one was
                                   buying stocks at high
                                   prices- so prices started
                                   to drop.
                Crash and Burn
•   This led to a panic!          • **The Stock Market Crash
    Everyone wanted to sell         was the spark that started the
    their stocks but no one         Great Depression which lasted
    wanted to buy- so prices        from 1929 to 1941.**
    dropped. This all happened
    on October 29, 1929-
    “Black Tuesday.”
•   The people who suffered
    the most were the ones
    who bought on margin.
•   People who bought stock
    on margin not only lost
    their money but lost the
    banks money as well and
    went into debt. Some
    people couldn’t take it and
    so they committed
       Causes and a Spark
• Cause 1: Uneven distribution of wealth
• Cause 2: Underconsumption and
• Cause 3: Americans were spending more
  money than they had (in debt)
• Spark: Stock Market Crash on Black
  Tuesday when everyone wanted to sell, no
  one wanted to buy, so the prices dropped
Hardships of Life During the
 Life in America and the Dust Bowl
              Let’s Bank On It
• As the Stock Market
  crashed, millions of
  Americans rushed to their
  banks to withdraw their
  money- but they were
  turned away. This led to
  a drop in consumer
                  Bank Crisis
• American’s took whatever
  money they had and hid it
  in their mattresses and
  bread boxes
• The banks had run out-
  there just wasn’t enough
  money in circulation
• This forced thousands of
  banks to close
            Cycle of Depression
• With the Crash of the
  Stock Market and banks
  failing, the US started into              Businesses
  a depression where the         Goods
  following characteristics
  are found:
   – 1. Few Jobs and 2. Little
• Depressions work into a         Don’t
  cycle:                                      Lose
                                 Get Paid
                                            Their Jobs
Not Only in America
          • Because of the Dawes
            Plan, the US was lending
            money to Germany to
            invest and pay back
            France and Great Britain
          • In the 1930s, Germany
            stopped paying their
            reparations and we
            couldn’t continue to give
            any aid either so Europe
            went into a Depression as
      • Initially the
        unemployed rate was
        3.7% which is GREAT
      • But as the Depression
        worsened, 25% of
        Americans lost their
        jobs (That’s 1 out of
        every 4!)
      • Those who didn’t lose
        their jobs had their
        wages and hours cut
Unemployed Americans
          • At this time we didn’t have

          • If you lost your job, you
            couldn’t pay rent, buy
            nutritious food, and many
            children had to drop out of
            school to get jobs

          • Families had to get their
            food at food banks and
            breadlines started by
      • Millions of
        Americans had to live
        on the streets
      • They formed
        communities called
        Hoovervilles named
        after President
        Herbert Hoover
          Gated Communities!
•   Hoovervilles were
    shantytowns of tents
    and shacks or lumber,
    tin and glass.
•   They were on parks and
    any deserted land.
•   They kept themselves
    warm with fires and
    covered themselves
    with newspapers.
    (Hoover blankets).
Plight of the Farmers
           • We have mentioned
             that farmers had been
             overproducing crops
             ever since World War
             I. Life got worse for
             farmers during the
             Great Depression
           • Part of the reason is
             the Great Plains
             suffered from a
             Farmers Woes
• From 1930 to 1934,
  one million American
  farmers couldn’t pay
  their mortgages
• Banks foreclosed on
  the land and took it
  back (and the
• Some worked as
  tenant farmers
  (similar to
                No More Grass

• During WWI, with demand high, farmers bought land on
  the Great Plains and continuously planted on it. They cut
  down the tall grass which had kept the topsoil from
  blowing away
• With constant growing, especially with wheat, the land lost
  a lot of nutrients and didn’t get a break
    Orange? Alamo? Rose? Nah…
• Dust Bowl is the nickname
  given to the Great Plains
  during the 1930s.
• Drought, loose topsoil, and
  high winds and overplanting
  contributed to dust storms
  that blinded and choked
  farmers, killed cattle, birds,
  and fish. It got everywhere-
  destroyed farms and
• Dust from Nebraska
  actually traveled to
  Massachusetts! That’s how
  strong the winds were
Okie Dokie!
      • Since dust destroyed the
        land, farmers had to pack
        up and leave their homes
      • Farmers who left the
        Great Plains and traveled
        out West (especially to
        CA) looking for jobs were
        called Okies.
      • However, once they got
        out West, life wasn’t
        much better- no jobs
      • John Steinbeck’s Grapes
        of Wrath
Presidential Responses to the
               Didn’t Cause It
•   In 1929, everyone was
    blaming President
    Hoover even though it
    wasn’t his fault. While
    he didn’t cause the GD,
    he didn’t do much to fix
•   Hoover’s policy towards
    the economy was much
    like that of Harding and
    Coolidge- “laissez
              But Didn’t Fix It
•   This policy didn’t work   • What 3 efforts did Hoover
    though and so he            do to help the economy?
    asked businesses and      • He cut taxes, lowered
    entrepreneurs to keep       the interest rates, and
    employment, wages,          created public works
    and prices at current       programs. Public works
    level- **he wanted them     programs are
    to volunteer to do so,      government
    he did not mandate          construction that would
    it.**                       create jobs and fix
                                community problems
                                (i.e. build dams,
                                bridges, sewers,
                       Trickle Down
•       Trickle down
    –      Hoover requested that
           the rich in America
           donated money to

•       He thought that if the
        rich spent money, it
        would eventually get to
        the poorest members
        in society (But it didn’t)
Volunteers? Anyone? Anyone?
• However, volunteerism did not work-
  businesses cut wages and laid of
  workers because it was in their own best
• Americans focused on themselves,
  instead of the interests of the nation.
                      Oh Dam
•   Americans showed
    their disapproval with
    Hoover’s “efforts” by
    nicknaming negative
    aspects in society after
    him (i.e. Hoovervilles)
•    Hoover did create one
    project that really
    helped give Americans
    jobs- the Boulder Dam,
    later renamed the
    Hoover Dam in 1930
    which would supply
    three states with
•   The Depression caused
    many Americans to
    blame capitalism and
    democracy for our
    problems and thought
    communism may be a
    better solution (like in
    Russia). In Europe
    during the Depression,
    leaders like Hitler and
    Mussolini were gaining
                    BONUS! Army
• Veterans from WWI came to
  Washington D.C. to demand
  that they get their bonus early.
• Supposed to get money for
  their time in the military in 1945
  but they wanted it in 1931
• Hoover vetoed giving the
  Bonus Army their money early
• Veterans set up Hoovervilles
  outside of White House
• Gens. MacArthur and
  Eisenhower ordered troops to
  use force (tear gas and
  bayonets) to remove them
            Time for Change
• By the next election of
  1932, Americans
  wanted Hoover out of
  office. They voted for
  Democrat Franklin
  Delano Roosevelt
• When he won- his
  theme song was
  “Happy Days Are
  Here Again”
Presidential Responses to the
      Great Depression
                     A New Deal
•   FDR came up with a plan to
    solve problems of the Great
    Depression called the New
    Deal. It was a program that
    had 2 phases.
•   The first phase focused on
    the 3 R’s: Relief,
    Recovery, and Reform
    which would take place in
    his first 100 Days in office.
    **In the first 100 days, FDR
    passed 15 laws which was
    HUGE- this was the “first
    New Deal”**
                 Fireside Chats
•   FDR and his brain trusts     •   The President used the
    (a group of advisors) took       radio to explain his policies
    three steps immediately to       to American families. Since
    fix problems: they               every American had one, it
    declared a bank holiday,         was a way for FDR to
    only reopened the ones           connect to the people- it
    that were in good shape,         also increased his
    and he started fireside          popularity- the public felt
    chats.                           connected.
•   On March 12, 1933,     • **He created the
    FDR told the public      FDIC- Fed. Deposit
    it was safer to have     Insurance
    their money in the       Corporation- to
    reopened banks           ensure that if we
    than under their         invested our money- it
    mattresses. **He         would be there when
    helped to increase       we went to get it
    the public’s
    confidence in the
              Let’s Go Fishing!
•   **The New Deal would        • **Even though FDR
    completely change the         wanted to increase
    role of the                   government involvement,
    government forever.           he didn’t want to give
    This would end policies       hand outs. He believed
    of laissez faire and          in the motto: “If you give
    would create a strong         a man a fish, you feed
    national government           him for a day, if you
    that gets involved to fix     teach him how to fish,
    problems.**                   you feed him for a
                                  lifetime.” **
              Social Security
•   Because the public supported FDR and all the
    efforts he was making, he started the 2nd New
    Deal in 1935. One of the most important bills
    of the century which is still around today is the
    Social Security Act. Explain what that act did:
•   When a person worked, some of their
    paycheck would be put into a savings
    account and the employer would match it.
    When they retired, they would get a little of
    that money each month.
               Alphabet Soup
• FDR created a lot of new   • CCC- Civilian
  programs during the          Conservation Corps- built
  Great Depression- they       telephone lines, dams,
  all had acronyms so they     planted trees
  were called “Alphabet      • NRA- National Recovery
  Soup” Examples?              Act- companies were
• FDIC- insured money in       “patriotic if they joined”
  banks                        agreed to pay workers
• AAA- Agricultural            good wages, better
  Adjustment Act- paid         hours, etc.
  farmers NOT to grow        • PWA- Public Works
  crops                        Admin- built schools, post
                               offices, houses, airports,
            Let’s Experiment!
• **It was kind of like a
  trial and error period-
  keep introducing
  programs until some
  work and try to get
  the economy growing
  again- like a doctor
  prescribing medicine
•   FDR was threatened by      •   While the majority of
    this so he tried to pack       Americans loved FDR,
    the court with six new         there were many critics
    justices who were Pro-         who didn’t think his
    New Deal and would             policies were good-
    support him- this              many of them were in
    technically would break        the Supreme Court.
    our system of checks           Many of the justices in
    and balances, so it            the Court declared New
    never passed.                  Deal legislation as
Pack The Court
•   Not only was FDR
    influential, but so was
    his wife Eleanor
    Roosevelt. She got
    her hands on as well.
    Most first wives were
    “decorative” but she
    campaigned and fought
    for rights of veterans,
    poor, and women.
    Even after FDR died,
    she became a
    representative to the
          The End is in Sight!
• Overall, the New Deal
  did help to start some
  economic growth
  during the Depression
  by providing jobs and
  fixing problems, but it
  won’t fully recover
  until the US enters

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