The Crash and the The Crash and the Great DepressionGreat Depression

The Late 1920s EconomyThe Late 1920s Economy

Healthy in AppearanceHealthy in Appearance►Prosperity in the marketProsperity in the market

1925 Stock values $27 billion1925 Stock values $27 billion 1928 Stock values grew by $11.4 billion1928 Stock values grew by $11.4 billion By Oct. 1929 Stock values hit $87 billionBy Oct. 1929 Stock values hit $87 billion

►Workers wages had risen by 40% since Workers wages had risen by 40% since 1914.1914.

►Unemployment was less than 4%Unemployment was less than 4%

►1929 John J. Raskob1929 John J. Raskob Wrote article “Everybody Ought to be Wrote article “Everybody Ought to be

Rich”Rich” Saving $45 / week over 20 years would Saving $45 / week over 20 years would

bring $400 / month income.bring $400 / month income.

Danger SignsDanger Signs►Uneven ProsperityUneven Prosperity

Mainly the rich got richerMainly the rich got richer 200 companies controlled 49% of Industry200 companies controlled 49% of Industry 1929 0.1% had $100K+ incomes and held 1929 0.1% had $100K+ incomes and held

34% of the country’s savings34% of the country’s savings 71% earned less than $2,500 / year.71% earned less than $2,500 / year. 80% had no savings 80% had no savings

►Buying on creditBuying on credit Consumer debt increased greatlyConsumer debt increased greatly

►Playing the Stock MarketPlaying the Stock Market A get rich quick attitude prevailedA get rich quick attitude prevailed Widespread speculation occurredWidespread speculation occurred Small investors put their life savings in the marketSmall investors put their life savings in the market Buying on margin--Buying on margin--

►Investors purchased stock for a fraction of its cost (10-Investors purchased stock for a fraction of its cost (10-50%) and borrowed the rest.50%) and borrowed the rest.

►Brokers charged high interest and could call in the loan at Brokers charged high interest and could call in the loan at any time.any time.

►Surplus of Manufactured GoodsSurplus of Manufactured Goods Wages rose and so did productionWages rose and so did production Consumers’ need for more products did not Consumers’ need for more products did not

keep up with production.keep up with production. Industry sales will begin to slump.Industry sales will begin to slump.

►Trouble for FarmersTrouble for Farmers Farm prices began to tumbleFarm prices began to tumble Farmers could not repay their debts Farmers could not repay their debts 6K banks went under as a result.6K banks went under as a result.

►WorkersWorkers Most workers still worked long hours for Most workers still worked long hours for

low wageslow wages

The Stock Market CrashThe Stock Market Crash

The Market CrashesThe Market Crashes►September 3, 1929 the Dow Jones Industrial September 3, 1929 the Dow Jones Industrial

Average had reached 381.Average had reached 381.►Prices of stock soared above their valuePrices of stock soared above their value►Black ThursdayBlack Thursday

Prices began to decline after the September peak.Prices began to decline after the September peak. Some brokers began to call in loansSome brokers began to call in loans Thursday, October 24, prices fell sharply (ie-GE Thursday, October 24, prices fell sharply (ie-GE

$400 stock sold for $283)$400 stock sold for $283) A group of Bankers pooled their money to buy A group of Bankers pooled their money to buy

stock and temporarily stabilized the market.stock and temporarily stabilized the market.

►Black Tuesday (the Great Crash)Black Tuesday (the Great Crash) Investors raced to get their money out Investors raced to get their money out

of the market.of the market. Tuesday, October 29, 1929, the Great Tuesday, October 29, 1929, the Great

Crash occurred.Crash occurred. 16.4 million shares sold in one day.16.4 million shares sold in one day. The Crash continued in the following The Crash continued in the following

days and by Nov. 13 the Dow was 198 . . days and by Nov. 13 the Dow was 198 . . . A $30 billion loss.. A $30 billion loss.

►Riches to RagsRiches to Rags Fortunes were lost overnightFortunes were lost overnight Brokers and banks called in loans, but Brokers and banks called in loans, but

people had no money to pay thempeople had no money to pay them Many committed suicide.Many committed suicide.

The Ripple Effect of the The Ripple Effect of the CrashCrash

►The crash affected more than just investorsThe crash affected more than just investors►The crash triggered the Great DepressionThe crash triggered the Great Depression► Impact on workers and farmersImpact on workers and farmers

Factories began to closeFactories began to close By 1932 12 million+ were unemployed (1/4 of the By 1932 12 million+ were unemployed (1/4 of the

labor force)labor force) GNP-- 1929 was $103 billion; 1933 $56 billionGNP-- 1929 was $103 billion; 1933 $56 billion Farm Prices fell moreFarm Prices fell more

►Corn--1929 was $1.04 / bushel; 1933 $0.38 / bushelCorn--1929 was $1.04 / bushel; 1933 $0.38 / bushel►Cotton--1929 was $0.17 / lb; 1933 $0.065 / lbCotton--1929 was $0.17 / lb; 1933 $0.065 / lb

Banks ClosedBanks Closed►““Bank Runs” occurred as people withdrew money out of Bank Runs” occurred as people withdrew money out of

fear and to pay stock loansfear and to pay stock loans►5,500 banks failed5,500 banks failed►9 million savings accounts vanished 9 million savings accounts vanished

World ImpactWorld Impact►US investments had enabled Germany to pay reparations.US investments had enabled Germany to pay reparations.►The Allies were dependent upon these reparations.The Allies were dependent upon these reparations.►US investment fell and German banks collapsedUS investment fell and German banks collapsed►War reparations ceased and Europe ceased buying War reparations ceased and Europe ceased buying

American goods.American goods.►The world economy and trade sank into depressionThe world economy and trade sank into depression

Causes of the DepressionCauses of the Depression►Over speculationOver speculation►Buying stocks on marginBuying stocks on margin►Government policiesGovernment policies►Uneven wealth distributionUneven wealth distribution►Overproduction Overproduction

Social EffectsSocial Effects

Widespread PovertyWidespread Poverty►HoovervillesHoovervilles

1931 Census estimated 15K homeless in 1931 Census estimated 15K homeless in NYCNYC

Shanty towns were built called Shanty towns were built called “Hoovervilles”“Hoovervilles”

People lived in anything--rusted out cars, People lived in anything--rusted out cars, boxes, crate houses, etc.boxes, crate houses, etc.

►FarmersFarmers Many lost their homes to the banksMany lost their homes to the banks Banks sold the homes at auctionBanks sold the homes at auction

►Dust BowlDust Bowl Region of the Great PlainsRegion of the Great Plains Drought and dust storms occurred throughout the Drought and dust storms occurred throughout the

1930s1930s 440K+ left Oklahoma440K+ left Oklahoma 300K left Kansas300K left Kansas Most went to California to find work.Most went to California to find work.

Dorothea LangeDorothea Lange►PhotographerPhotographer►Hired by the Government to document Hired by the Government to document

the lives of the migrant farmers.the lives of the migrant farmers.

Strain on societyStrain on society►Anxiety and depression were commonAnxiety and depression were common►HealthHealth

Starvation and malnourishment were Starvation and malnourishment were commoncommon

Children suffered the mostChildren suffered the most►The FamilyThe Family

Living conditions declinedLiving conditions declined Men felt like failuresMen felt like failures Women worried about feeding their families.Women worried about feeding their families.

►Discrimination IncreasedDiscrimination Increased There was a general rise in hostility and There was a general rise in hostility and

suspicion against minorities.suspicion against minorities.

Surviving the Great Surviving the Great DepressionDepression

OverviewOverview►Those who survive will forever be Those who survive will forever be

impacted. Most will continue to save impacted. Most will continue to save money as though financial chaos is money as though financial chaos is just around the next corner.just around the next corner.

Pulling TogetherPulling Together►People helped each other and were People helped each other and were

extremely generous with what little extremely generous with what little they had.they had.

►Political SolutionsPolitical Solutions Most Americans trusted the democratic Most Americans trusted the democratic

process to handle the problems.process to handle the problems.

►HumorHumor Hoover Blankets--old newspapers used to Hoover Blankets--old newspapers used to

keep warm.keep warm. Hoover Flags--empty pockets turned Hoover Flags--empty pockets turned

inside out.inside out. Will Rogers--”When Wall Street took that Will Rogers--”When Wall Street took that

tail spin, you had to stand in line to get a tail spin, you had to stand in line to get a window to jump out of.”window to jump out of.”

Signs of ChangeSigns of Change►Feb. 1933--Prohibition was repealedFeb. 1933--Prohibition was repealed►The Empire State BuildingThe Empire State Building

Began in 1930Began in 1930 Built by John J. RaskobBuilt by John J. Raskob Won the race to build the world’s tallest Won the race to build the world’s tallest

building.building. Became a symbol of hope.Became a symbol of hope.

►The true force that will end the The true force that will end the Depression will be WWIIDepression will be WWII

Election of 1932Election of 1932

Hoover’s Handling of the Hoover’s Handling of the CrisesCrises

►Failure of Voluntary ActionFailure of Voluntary Action Hoover believed US businesses should Hoover believed US businesses should

issue voluntary controls to ease the crisis.issue voluntary controls to ease the crisis. Temporarily it worked, but businesses Temporarily it worked, but businesses

soon did what was in their own best soon did what was in their own best interest.interest.

►Government ActionGovernment Action Hoover increased spending on public works Hoover increased spending on public works

ie-buildings, roads, parks and dams (Boulder ie-buildings, roads, parks and dams (Boulder Dam or Hoover Dam)Dam or Hoover Dam)

1930 Congress passed the Hawley-Smoot 1930 Congress passed the Hawley-Smoot Tariff (resulted in a trade war that slowed Tariff (resulted in a trade war that slowed international trade)international trade)

1932 Hoover established the Reconstruction 1932 Hoover established the Reconstruction Finance Corporation (RFC) which gave credit Finance Corporation (RFC) which gave credit to banks to extend loansto banks to extend loans

►Hoover’s UnpopularityHoover’s Unpopularity Blamed for all the problemsBlamed for all the problems He was against direct intervention in the He was against direct intervention in the

economy.economy. Some economists began to back the ideas Some economists began to back the ideas

of British economist John Maynard of British economist John Maynard Keynes--massive government spending to Keynes--massive government spending to stimulate the economy and encourage stimulate the economy and encourage private spending.private spending.

►Veteran’s March on D. C. Veteran’s March on D. C. 1932 20K WWI Vets and families encamped in Washington, D. 1932 20K WWI Vets and families encamped in Washington, D.

C. C. The “Bonus Army” wanted immediate payment of a pension The “Bonus Army” wanted immediate payment of a pension

bonus promised in 1945.bonus promised in 1945. Congress disagreed and most went home.Congress disagreed and most went home. After some violent incidents, Hoover called in the Army under After some violent incidents, Hoover called in the Army under

General Douglas MacArthur.General Douglas MacArthur. MacArthur decided to use force to drive the marchers out of MacArthur decided to use force to drive the marchers out of

D. C. D. C. Using bricks and stones the Vets fought back and many were Using bricks and stones the Vets fought back and many were

injured.injured. Hoover took the blame.Hoover took the blame.

The Election of 1932The Election of 1932

►Republicans nominated Herbert Republicans nominated Herbert HooverHoover

►Democrats nominated the former Democrats nominated the former Governor of New York, Franklin Governor of New York, Franklin Delano Roosevelt.Delano Roosevelt.

►Roosevelt said, “I pledge myself to a Roosevelt said, “I pledge myself to a New Deal for the American people.”New Deal for the American people.”

►The election was a battle b/w 2 The election was a battle b/w 2 philosophies--those who believed philosophies--those who believed government could not and should not government could not and should not try to fix people’s problems and those try to fix people’s problems and those who felt that large scale problems who felt that large scale problems required government helprequired government help

►Any Democrat could have beat Hoover.Any Democrat could have beat Hoover.►FDR won by 7 million popular votes.FDR won by 7 million popular votes.►Most voted against Hoover rather than Most voted against Hoover rather than

for Roosevelt.for Roosevelt.►1933 FDR was inaugurated and said, 1933 FDR was inaugurated and said,

“So first of all let me assert my firm “So first of all let me assert my firm belief that the only thing we have to belief that the only thing we have to fear is fear itself.”fear is fear itself.”