the great depression mr. stikes. ssush17 the student will analyze the causes and consequences of the...

The Great Depression

Mr. Stikes

SSUSH17 The student will analyze the causes and consequences of the Great Depression.

a. Describe the causes, including overproduction, underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression.

b. Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west.

c. Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles.

Causes of the Great Depression

a. Describe the causes, including overproduction, underconsumption, and stock market speculation that led to the stock market crash of 1929 and the Great Depression.

Terms to Understand

Long Term Causes of Great Depression Overproduction

Underconsumption

Speculation

excessive production, production  in excess of need or stipulated amount. [Random House Dictionary, © Random House, Inc. 2012. ]

engagement in business transactions involving considerable risk but offering the chance of large gains, especially trading in commodities, stocks, etc., in the hope of profit from changes in the market price.[Random House Dictionary, © Random House, Inc. 2012. ]

Consumption of less than is produced; consumption of less than the usual amount.[Webster’s Revised Unabridged Dictionary, © C. & G. Merriam & Co. 1913. ]

Buying on margin

Dow Jones Industrial Average (DJIA)

Stock

Long Term Causes of Great Depression

Buying securities with the aid of borrowed money[http://campus.murraystate.edu/academic/faculty/lguin/Schematic/Margin.htm.]

Stock index of 30 of the top blue chip stocks on the New York Stock Exchange – basically, when it is up, prices are up & vice versa[http://www.personalfinance.duke.edu/glossary-term/dow-jones-industrial-average. ]

Ownership of a portion of a company that gives you: 1) a vote on company policy, including picking the board of directors and 2) a right to a percentage of company earnings[http://hspm.sph.sc.edu/courses/Econ/Classes/Stocksandflows/Stocksandflows.html. ]

A piece of stock is called a “share”

Causes of the Depression Federal Reserve

Founded in 1913 to help keep economy stable

System made up of 12 regional banks and a board of directors

Controls US monetary policyThe control of the supply and cost of

money Practically, the Fed:

Sets interest ratesSells government securitiesSet bank reserve levels

Outline of the Crash

Stock Market Crash of 1929 Black Thursday, October 24, 1929:

Many stocks sold; those who bought on margin are forced to sell to pay back loans Public confidence in markets shaken

Bankers agreement (led by J.P. Morgan and Co.) – buy stocks above market value Attempt to prop up market, restore

confidence

Friday-Saturday, October 25, 1929: Market holds steady

Stock Market Crash of 1929 Black Monday, October 28, 1929:

Average stock price (DJIA) dropped 13% 2nd worst day in the history of the market

Black Tuesday, October 29, 1929: Rush to sell at opening bell 16,410,030 shares traded Average stock price (DJIA) dropped

another 12% 3rd worst day in the history of the market

Long Term CausesExplanations

Causes of the Depression “Prosperity Decade” of the 1920’s

High employment Low inflation 30% rise in industrial production US produced ½ of world’s industrial

output Per capita income:

1919 – $5201929 – $681

Causes of the Depression “False Positives”

Widespread poverty60% of nation lived on less than $2,000

annually40% of nation lived on less than $1,500

annually Wealth disparity

Richest 1% of Americans earned 19% of all profits in 1929, versus 12% in 1919

Causes of the Depression “False Positives”

Lower wages in key industries like mining, manufacturing, transportationEx. coal miner’s avg. hrly. wage: $0.845

in 1923 vs. $0.625 in 1929 93% of non-farm population saw

disposable income fall during 1920’s 5,000 of nation’s 30,000 banks failed

between 1920 and 1929

Causes of the Depression “False Positives”

Depression of farm pricesRevival of European agriculture after

WWI Introduction of Australian and

Argentinean products to world markets Long term debt for farmers High taxes for farmers

Life During the DepressionGovernment Action,

1929-1932

Causes of the Depression Federal Reserve during the

Depression Slowed growth of monetary supply

leading up to stock market crash “Liquidity crisis”

No cash to spend for local banks or businesses

Causes of the Depression Tariffs

Fordney-McCumber Tariff of 1922 Return to isolationism Raised tariffs to an average of 38.5% on

imported goods

Hawley-Smoot Tariff of 1930 Goal: raise tariffs on agricultural products, increase

domestic prices/production Actual result: decrease in exports, perhaps

retaliationDID YOU KNOW: Economic historians debate whether or not Hawley-Smoot made the Great Depression worse. Traditionally, historians have argued this protectionism further damaged the American economy. Newer studies, however, show the tariff being responsible for about 21% of the decline in GDP.

Tariffs Rates under Fordney-McCumber vs. Smoot-Hawley (equivalent ad valorem rates)

Product Fordney-McCumber Smoot-Hawley

Chemicals 29.72% 36.09%

Earthenware, and Glass 48.71 53.73

Metals 33.95 35.08

Wood 24.78 11.73

Sugar 67.85 77.21

Tobacco 63.09 64.78

Agricultural Products 22.71 35.07

Spirits and Wines 38.83 47.44

Cotton Manufactures 40.27 46.42

Flax, Hemp, and Jute 18.16 19.14

Wool and Manufactures 49.54 59.83

Silk Manufactures 56.56 59.13

Rayon Manufactures 52.33 53.62

Paper and Books 24.74 26.06

Sundries 36.97 28.45

TOTAL: 38.48 41.14Source: U.S. Tariff Commission, The Tariff

Review, July 1930, Table II, p. 196.

The Dust Bowl

b. Explain factors (include over-farming and climate) that led to the Dust Bowl and the resulting movement and migration west.

Farm Problems Overfarming

Need to produce more to make same amount of money

Leads to poor soil quality, etc.

Debt Needed to borrow to produce more High interest rates and low prices led to

more debt

Farm Problems Natural Phenomenon

Boll Weevil In Georgia by 1915 Forced farmers to

abandon fields Many farms fore closed Sharecropping increased

Drought Georgia’s worst drought in history: 1930-

1931

Typical Georgia farm family during the Depression:

No electricity No running water No indoor bathroom Inadequate diet (mainly of molasses, fatback &

cornbread) No education system to speak of Few rural clinics, hospitals, or health care

workers Much sicknesses (tuberculosis and malaria

were common)Conditions were described as "depleted soil, shoddy livestock, inadequate farm equipment, crude agricultural practices, crippled institutions, a defeated and impoverished people." Arthur F. Raper, Preface to Peasantry: A Tale of Two Black Belt Counties (1936)

Farm Problems Natural Phenomenon

Dust Bowl Period of environmental disaster during the

1930’s in the Great Plains Caused huge dust storms of top soil to

blow throughout the country Causes of the Dust Bowl

Overfarming / OvergrazingSod on the Great Plains was thin, leaving it

vulnerable to being overfarmed and overgrazed

Drought

"Fleeing a dust storm”

Farmer Arthur Coble and sons walking in the face of a dust storm, Cimmaron County, Oklahoma. Arthur Rothstein, photographer, April, 1936.

From the Library of Congress.

“Black Blizzard”

A black blizzard over Prowers Co., Colorado, 1937.

From Western History Collection, University of Oklahoma.

“Black Blizzard”

A black blizzard over Prowers Co., Colorado, 1937.

From Western History Collection, University of Oklahoma.

“A dust cloud approaches a small town in Oklahoma.”

http://www.weru.ksu.edu/new_weru/multimedia/dustbowl/big/weokla.jpg

Dust storm approaching Stratford, Texas Dust bowl surveying in Texas

Image ID: theb1366, Historic C&GS Collection Location: Stratford, Texas Photo Date: April 18, 1935 Credit: NOAA George E. Marsh Album

Results of the Dust Bowl Environmental Disaster

Lost between 2.5 and 5 inches of topsoil over almost 25 million acres of land in the Great Plains

Movement west Over 1,000,000 migrant farm workers

moved west by 1939

Social and Political Impact of the Great Depression

c. Explain the social and political impact of widespread unemployment that resulted in developments such as Hoovervilles.

Daily Life in the Depression Unemployment / Loss of income

> 3 million in 1929 4 million in 1930, 8 million in 1931, 12 1/2 million in 1932

About ¼ of American families did not have one wage earner

¾ of American workers were part-time

“Hoovervilles” Towns of shacks and shantys set up by people

out of work

Bread Lines

Dow Jones Industrial Average,1920-1939