Great Depression

Warnings of an unsound economy

Uneven prosperity

uneven dist. of wealth 0.1% at top owned as much

as bottom 42% of American families (42% below poverty line)

of the 58% above the poverty line, most fell into the middle class category - they were not wealthy; they had jobs b/c of the industrialization & consumerization of the American market place

this middle class depended on their salaries and when productivity declined they lost their jobs

and b/c of low savings, they had to cut back on their purchases

this decline in consumption among the middle class ruined the whole country

Buying with creditPlaying the stock marketOverproduction and under-consumptionTrouble for farmersTrouble for workers

The stock market: the public invests in co.

by purchasing stocks; in return for this they expect a profit

b/c of booming 1920's economy, $ were plentiful, so banks were quick to make loans to investors

also investors only had to pay for 10% of the stock's actual value at time of purchase this was known as

BUYING ON MARGIN, and the balance was paid at a later date

this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck

b/c of all this buying & selling, stock value increased (Ex: G.E stock $130 $396/share)

this quick turnover didn't aid cos. they needed long term investments so they could pay bills (stock value was like an illusion)

unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value

all of this gave a false sense of security/confidence in the American market

Stock Market

Purpose: business owners sell portions (shares) of their companies to investors.

High today=higher tomorrowBuy as much as possibleBuying on marginNo way to repay (decline)SpeculationMass selling

Banks

People deposit banks make loans

to stockbrokers stockbrokers loan

money to individual investors

individual investors unable to sell stocks Unable to pay back

money

Black Tuesday

Sept 1929: stock prices peak then decline People begin to sell

Tuesday October 29: bottom fell out of stock market

Signaled beginning of Great Depression

beginning in Oct. 1929, investors’ confidence dropped, leading to a market collapse

all tried to sell at once and bottom fell out of market = panic selling… (many bankruptcies as banks called in loans)

only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy

Hawley- Smoot Tariff

Europe also affected by crash

US no longer buy imports Congress passed law to

protect Amer businesses from foreign competition by raising tariff on all imports

Europe raised tariff on all US imports

Caused slump in economyin

Causes of Great Depression

Tariffs and war debt polices that cut down the foreign market for Amer goods

Crisis in the farm sectorAvailability of easy creditUnequal distribution of wealth

American Families

Unemployment African

Americans/Latinos Women Men Suicide Children Marriage/Birth Rate Soup Kitchens/Bread

Lines

Natural Disasters

Dust Bowls Great Flood of 1936

Herbert Hoover- believed that the economy should be allowed to function with minimal intervention

- Govt should not take care of its’ people, but people should take care of themselves

- People against Hoover b/c felt he caused depression and not helping situation

- Hoovervilles

Hoover Cont

Boulder DamFederal Home Loan Bank ActReconstruction Finance Corporation

Bonus Army

Pay WWI soldiers everyday they served during war

Govt not pay until 1945 Vets wanted/needed

money now Congress didn’t pass

Patman Bill Vets refused to leave;

Hoover ordered their removal