CRASH AND DEPRESSION The Economy in the Late 1920s. 2 A. Wonderful Prosperity 1. Stock market rose 2. Workers wages had risen B. Everybody Ought to be Rich 1. People had confidence 2. Americans trusted corporate leaders C. Welfare Capitalism 1. To prevent unions, employers raised wages, provided benefits (paid vacations and health plans) 3 A. Uneven prosperity 1. Small portion of population held most of nations wealth B. Buying on Credit 1. Increase in personal debt 2. Installment plans gain popularity C. Playing the Stock Market 1. Get-Rich-Quick mentality 2. Speculation high risk investments leading to high gains 3. Buying on Margin Investors purchase a stock for only a fraction of its price, borrowing the rest 4 D. Too Many Goods, Too Little Demand 1. Assembly line created overproduction E. Trouble for Farmers 1. After WWI, prices decreased 2. Farmers were unable to pay debt causing bank failures 3. President Coolidge vetoed bills to assist farmers F. Trouble for Workers 1. Uneven wealth, wages were still too low, long hours 5 The Stock Market Crash 6 A. Dow Jones Industrial Average 1. Measure of average stock prices of major industries 2. Peak September 3, 1929 3. Began to see stock prices fall slowly B. Black Thursday 1. October 24, 1929 Dow dropped drastically 2. Investors began to sell due to worries stock prices fell C. Black Tuesday 1. October 29, 1929 Great Crash new business cycle 2. Millions of shares sold loses in the billions $$$ 7 8 A. Great Depression 1. A severe economic decline that lasted from 2. Americans lost jobs, farms, homes ripple effect B. Impact on Workers and Farmers 1. Factories began to close unemployment soared 2. Gross National Product (GNP) a. Total value of goods and services a country produces annually b $103 Billion 1933 $56 Billion 3. Already low farm prices fell even lower 9 C. Banks close 1. People rushed to the bank to withdraw money 2. Unpaid loans 3. Banks couldnt return depositors money forced to close D. Impact on the World 1. Interdependent international banking, trade, industry 2. U.S. was leading economy domino effect 3. Stock market crash started a downward cycle in global economy. 4. U.S. stopped investing in foreign countries (Germany forced to stop paying WWI debt) 10 A. Great Crash was only the SPARK B. Underlying Causes 1. Overspeculation a. Stock market was based on borrowed money and optimism b. Collateral item of value that a borrow agrees to forfeit if unable to repay 2. Government Policies a. Tight-money policy to control credit. Too little money. 3. An Unstable Economy a. Uneven distribution of wealth. 11 Social Effects of the Depression 12 A. People at all levels of society faced: 1. Wage cuts and unemployment B. Hoovervilles 1. Low-paid labors were the hardest hit. Lost their homes. 2. Hoovervilles makeshift shelter of the homeless C. Farm Distress 1. Farmers could not pay their mortgages auctioned off 13 14 15 16 17 18 19 20 21 22 23 24 25 26 D. The Dust Bowl 1. Environmental disaster 2. Region in the Great Plains were drought and dust storms took place. 27 28 A. Photo Journalist B. Photos of migrant workers helped win aid from (FSA) 29 A. Physical and Psychological 1. Anxiety, depression, suicide B. Impact on Health 1. Poor diet and inadequate medical care C. Stresses on Families 1. Fewer divorces 2. Women were accused of taking jobs away from men 30 D. Discrimination Increases 1. Many minorities lost their low-paying jobs to whites 2. Father Divine started the Harlem Soup Kitchen 3. Scottsboro Boys denied defense attorney 31 Surviving the Great Depression 32 A. Depression Generation 1. Avoided buying on credit 2. People agreed to keep auction bids low B. Seeking Political Solutions 1. The Socialist party Communist gained some support 2. Social justice C. Depression Humor 1. To fight despair a. Hoovervilles, Hoover-blankets, Hoover-flags 33 A. Prohibition is Repealed st Amendment passed to curb gangsters B. Empire State Building 1. Symbol of hope 2. Worlds tallest building C. End of an Era 1. Al Capone arrested on tax evasion 2. Babe Ruth retires 3. Henry Ford labors prime enemy 4. Lindbergh Baby kidnapped and murdered 34 The Election of A. Voluntary Action Fails 1. Hoover believed the best way to end the Depression was voluntary controls by American businesses. 2. Key to recovery according to Hoover - confidence B. The Government Acts 1. Government spent on public buildings, roads, parks, and dams. 36 B. The Government Acts 2. Hawley-Smoot Act a. Tariff is a tax on imports b. Trying to protect domestic industries c. Highest import tax in history d. Backfired Europeans raised their own tariffs e. International Trade Slowed 3. Reconstruction Finance Corporation (RFC) a. Provided banks government credits to give loan extentions b. Banks continued to fail 37 C. Hoovers unpopularity grows 1. His attitude made him seem cold and hard-hearted 2. Economist John Maynard Keynes supported more government spending D. Veterans March on Washington 1. Bonus Army marched on Washington, DC wanting pension bonus pay 2. Hoover called in the U.S. Army, led by Gen. Douglas MacArthur he used brutal force 38 39 40 A. Franklin Delano Roosevelt (FDR) 1. Democrat Very optimistic 2. Disability Polio, could not walk without aid 3. Warm Springs, GA 4. Wife Eleanor Roosevelt distant cousin, very politically active and a social reformer 5. Governor of New York work for relief and jobless 6. Promised a New Deal for unemployment and relief 41 42 A. Republican Hoover(I) versus Democrat Roosevelt B. Issue Those that believed that the federal government could not and should not try to fix peoples problems, And Those who felt that large-scale problems such as the Depression required the governments help C. FDR won by a huge margin 43 44