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GREAT DEPRESSION-1929-33TRANSCRIPT
THE GREAT DEPRESSION
Arpita Upadhyaya
Aravindhan Gopalan
Abinash Biswal
Dayanidhi Kar
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Agenda
Causes
Impact
Overview
Reforms Implemented
Economic Depression – What is it?
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• Severe and prolonged downturn in economic activity
• Recession that lasts two or more years.
• Characterized by substantial increases in
unemployment, drop in available credit, diminishing output, bankruptcies and sovereign debt defaults, reduced trade and commerce, sustained volatility in currency values
• Consumer confidence and investments decrease, causing the economy to shut down
Overview – The Great Depression
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• Worldwide economic downturn that began in 1929 and lasted until about 1939
• Ranks second only to the Civil War as the gravest crisis in American history
• Longest and most severe depression ever experienced by the industrialized Western world
• Reduction in consumer spending, drastic declines in output, severe unemployment, and acute deflation, catastrophic poverty
CAUSES OF THE GREAT DEPRESSION
THE STOCK MARKET CRASH
• Speculation: Too many Americans were engaged in speculation – buying stocks & bonds hoping for a quick profit
• Margin: Americans were buying “on margin” – paying a small percentage of a stock’s price as a down payment and borrowing the rest
THE STOCK MARKET CRASH • Occurred on the 24th and 29th of Oct –
called Black Thursday and Black Tuesday
• On Oct 24th, the Dow Jones industrial average hit a low of 299.5, down from a high of 381.2 from the previous month – a 21% decline
• Triggered a selling panic
• 9% drop on trading that was approx three times the normal daily volume for the first nine months of the year
THE STOCK MARKET CRASH• 16.4 million shares were sold
that day – prices plummeted
• People who had bought on margin (credit) were stuck with huge debts
• Stocks lost nearly 90 percent of their value
• Stockholders had lost more than $40 billion dollars
BANKING PANIC AND MONETARY CONTRACTION
• After the crash, many Americans panicked and withdrew their money from banks
• Banks had invested in the Stock Market and lost money
• People lost money as bank deposits were uninsured
• Banks hesitated in giving new loans – aggravated the depression
BANKING PANIC AND MONETARY CONTRACTION
• In 1929- 600 banks fail
• By 1933 – 11,000 of the 25,000 banks nationwide had collapsed
• culminated with the national “bank holiday” being declared which closed all banks
REDUCTION IN CONSUMER SPENDING
• By late 1920s, American consumers were buying less
• Rising prices, stagnant wages and overbuying on credit were to blame
• People did not have the money to buy goods factories produced
• Vicious circle of unemployment and dip in consumer spending continued
SMOOT HAWLEY TARIFF
• American economic policy with Europe to help protect American firms
• Protectionist Trade Policies-charged a high tax for imports
• Less trade between America and Foreign countries leading to economic retaliation
THE GOLD STANDARD
• Limited US Monetary policy
• Imbalances in trade flows gave rise to international gold flows
• Interest rates hiked substantially to stem gold outflow
• High interest rates depressed spending and led to high unemployment
IMPACT OF THE GREAT DEPRESSION
EFFECTS ON INDUSTRY
• Corporate profits - from $10 billion to $1 billon
• Business failures: 100,000 between 1929 and 1933
• GNP – $104 billion in 1929 to $56 billion in 1933
• Total national income – fell by Over 50%
Decline in Industrial production in various countries
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EFFECT ON WORKERS AND FAMILY• Unemployment ~25% in 1932?
– underemployment– patterns of reemployment and layoffs
• “Depression mentality”
Men Lined Up at the New York City Employment Bureau, 1932
EFFECT ON WORKERS AND FAMILY
A. Jobless / Homeless
• 1930-1932 – Jobless goes from 4 to 12 million
• Houses are lost, people become homeless
B. Hatred for President Hoover
• Say’s it’s not Government’s job to fix the Poor
• People name Poor Places after Hoover – Hooverville
SO, IN A NUTSHELL
Great Crash Investors
Businesses and WorkersInvestors lose
millions.
Businesses lose profits.
Consumer spending drops.
Workers are laid
off.
Businesses cut investment and
production Some fail.
Banks
Businesses and workers cannot repay bank loans.
Savings accounts are wiped
out.
Bank runs
occur.
Banks run out of
money and fail.
World Payments
Overall U.S. production plummets.
U.S. investors have little or no money to
invest.
U.S. investments in
Germany decline.
German war payments to Allies fall off.
Europeans cannot afford
American goods.
Allies cannot pay debts to
United States.
Reforms Implemented
• A. President Roosevelt Elected (1932)– Brain Trust- Used professors and experts to
develop programs to fight the depression– Promised “New Deal” for Americans
• Fixing Banks
1. Declared a banking crisis
a. Closed ALL banks/ 4 day “Bank Holiday”
b. Emergency Banking Relief Act- Passed by allowing only sound banks to reopen.
2. Fireside Chat- told Americans by radio that the good banks were safer than $$ in mattress.
Reforms Implemented
A NEW DEAL!!!
a. Unemployment*CCC- Civilian Conservation Corp*PWA- Public Works Administration*TVA- Tennessee Valley Authority
b. Recovery Plans*NRA- National Recovery Act*AAA- Agricultural Adjustment
Admin.
c. Prevention Reforms*FDIC- Federal Deposit Insurance
Corporation *SEC- Securities and Exchange
Commision
Reforms Implemented
Reforms Implemented
Results-
Did NOT end the Depression
1. Most of the Businessmen disliked New Deal
2. Gave country confidence
a. Ended banking crisis
b. Helped with some Jobs
c. Infrastructure (buildings, schools, bridges, electricity, artwork)
Conclusion
Thank you