Great DepressionUSH-6.3

I. Underlying ProblemsA. Declining demand and

overproduction were the main causes

B. 1920s seemed good w/high employment

1. Production & per capita income rose

2. Distribution of income was uneven with rich and poor getting farther apart

3. Workers didn’t get profits

I. Underlying ProblemsC. A bad cycle started

1. Workers stop buying goods2. Company make less3. Company lays off workers4. More workers buy less

goods5. Company makes less6. Company lays off more

workers7. More workers buy less

goods8. Company makes less9. Company lays off more

workers10. Etc…

I. Underlying ProblemsD. Farm economy collapsed

1. Farmers expanded during WWI with big markets

2. Lost markets after WWI3. Couldn’t make payments on

land & equipment4. Grew more crops to make

up the difference5. Foreclosures on land

caused lots of banks to close BEFORE the stock market crash

6. Less money to loan others

II. RepublicansA. In 1920s, Republican

administrations gave up on limiting Big Business

1. More laissez-faire made companies more powerful

B. Raised tariffsC. Supreme Court overturn

child labor laws & female minimum wages

II. RepublicansD. Income taxes on the

wealthy were cut1. They spent more on luxury

items2. Didn’t make up for

everyone else NOT spending

3. Spent their money on stocks instead of new factories

4. Drove up stock speculationa) “Will I be able to sell before

the price falls?”

III. Stock MarketA. Stocks could be bought on

margin1. Investors could borrow

using the stock they owned to buy more stock

B. Speculation led to inflated stock values and the crash

1. Lots of sellers in October of 1929

III. Stock MarketC. Firms began to call in

margin loansD. Investors had to sell at

low prices to pay back loans

E. Stock prices plungeF. “Black Tuesday” October

29, 1929, the bottom fell out

1. WAS NOT THE CAUSE OF THE GREAT DEPRESSION!!!

IV. Deeper in debtA. Federal Reserve began in

1913 as a national bank1. Fed is to regulate money

supply by making loans to banks

2. Low interest rates in early 1920s and raised them over the decade

3. Even tighter after the crasha) Less lending when more was

neededb) If the Fed had lowered

interest rates, the Depression MIGHT have been easier

IV. Deeper in debtB. Congress passed the

Hawley-Smoot tariff in 1930

1. Very high tariff2. Meant to make Americans

buy US goods3. Makes other countries stop

buying our goods4. Less profit and the spiral

continues

V. Government reactionA. US gov’t had always been pretty

laissez-faire1. Wait and the economy will fix

itself

B. Hoover actually asked business owners to not lower wages or layoff workers

1. Lower demand made this not possible

C. “Prosperity is just around the corner.”

D. Bonus Army1. WWI vets march to DC to get a

bonus to be paid in 19412. US Army disbands them

VI. Dust BowlA. The Great Plains are

damaged by:1. Overgrazing2. Overplanting3. Drought

B. Top soil dries up and blows away

1. Darkens the sky along east coast

2. Creates migrant workersa) Many “Okies” move to

California for work

VII. Daily lifeA. Unemployment rate

reached 25%1. No unemployment

insurance2. People lose homes and

farms3. Hobos hop on trains to

travel to find work4. Live in shantytowns called

Hoovervilles

B. Those with jobs have wages cut

1. Demand drops farther

VII. Daily lifeC. Runs on banks

1. People go to the bank to get their money out

2. People who are late get no money b/c it is already gone

D. Charities try to help1. Too many poor and not

enough money

VII. Daily lifeE. Families are hit hard

1. Marriages are delayed2. Birth rates fall3. Men often abandoned4. Unemployed men lose

status and wife and kids go get any work to survive