what explains the decline in personal income beginning in 1929?
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What explains the decline in personal income beginning in 1929?. The Stock Market Crash (’29) and Great Depression (‘30s). What were the causes of the Great Depression and how did the depression affect the lives of Americans?. Background: Business Cycle. Peak. Expansion. Recession - PowerPoint PPT PresentationTRANSCRIPT
What explains the decline in personal income beginning in 1929?
The Stock Market Crash (’29) and Great Depression (‘30s)
What were the causes of the Great Depression and how did the depression affect the lives of Americans?
Expansion
*Increase production
*Wages high
Peak
Recession(Business Slump)
*Decrease Production*Decrease Wages*Layoffs
Depression(longer businessdownturn)
Measure of GDP (Gross Domestic Product) Estimated total value of all final goods.
What basically determines the ups and downs in the business cycle?
SUPPLY and DEMAND
I. Background: Business Cycle
Expansion*Increase production
*Wages high
Case in Point: Model T Ford
+
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Henry Ford’s company mass produces Model T. Assembly line production makes the process quick and affordable. Company makes money, investors make money, workers make money….
WHAT HAPPENS WHEN EVERYONE WHO WANTS A MODEL T HASALREADY PURCHASED ONE????
Case in Point: Model T Ford
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Henry Ford’s company meets the demand for Model T. Supply meets Demand.
Peak (Supply meets demand)
WHAT WOULD HAPPEN IF HENRY FORD CONTINUED PRODUCINGMODEL T’s AT THE SAME RATE DURING PEAK AS HE HAD DURINGEXPANSION?
Case in Point: Model T Ford
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Henry Ford must reduce production to meet lower demand for Model T.Company does not make as much money, investors do not make as muchmoney, and some workers may be laid off.
Recession(Business Slump)
*Decrease Production*Decrease Wages*Layoffs
Stock Market measures health of economy / business bybuying and selling stock (supply and demand.)Stock- ownership in company.
New York Stock Exchange
What role does the stock market play in the Business Cycle?
Business distributes
stock (shares)to shareholders.
STOCK MARKET
What role does the stock market play in the Business Cycle?
Business distributes
stock (shares)to shareholders.
Business earns money.
STOCK MARKET
What role does the stock market play in the Business Cycle?
Business distributes
stock (shares)to shareholders.
Business earns money.
Dividends(portion of earnings)
given tostockholders.
STOCK MARKET
What role does the stock market play in the Business Cycle?
Business distributes
stock (shares)to shareholders.
Business earns money.
Dividends(portion of earnings)
given tostockholders.
Stockholdersbuy more
shares of stock in company.
STOCK MARKET
Price of stocks in the stock market reflects the expectation of shareholders.
Expectation / Speculation stock prices high = stock grows or remain high
Expectation / Speculation stock prices low = stock goes down
Expectationhigh and people buy
Expectationlow and people stop buying
Peak
Economy 1920s
*optimistic *prosperity*wages high*confidence in business
***Over speculation-Stocks overvalued
GREAT DEPRESSION
II. Causes and Effects ofGreat Depression
*uneven distribution of wealth*80% people had no savings*installment buying-Debt*stock on margin-borrowed $*over production*laissez faire gov’t
Oct. 29, 1929Black Tuesday
1. Over speculation of stocks using borrowed money that could not be repaid when the stock market crashed in 1929.
The trading floor of the New York Stock Exchange just after the crash of 1929. In a single day-Black Tuesday- a record sixteen million shares were traded and thirty billion dollars vanished into thin air.
2. The “ripple effect” of thestock market crash.
II. Causes and Effects ofGreat Depression Investors
lose money
1929Stock Market
Crash
Many investors losteverything in the stock market
Income drops 40%
Factorieslay-off
workers-no insurance
Investorslose
money
1929Stock Market
Crash
Typical scene outside an employment agency.
86,000 businesses fail
13 million workers left unemployed
Local missionssponsor soup kitchens to feed the unemployed.
How did massive unemployment impact the nation’s psychological state?
Feelings of shame, depression,hopelessness.
Banks fail,people take money out of
banks
Factorieslay-off
workers-no insurance
Investorslose
money
1929Stock Market
Crash
“Run on the Bank” (1933)
Federal Reserve failed to prevent widespread collapse of banking system leading to severe contraction in the nation’s supply of money in circulation.
Farm foreclosures,banks need
money
Banks fail,people take money out of
banks
Factorieslay-off
workers-no insurance
Investorslose
money
1929Stock Market
Crash
Farmers worst hit by Great Depression. New machineryincreased crop yields, but surplusesmeant crop prices remained low— Mortgaged farms are lost.
(1933-1934) Farmer’s plight in Great Plains made worse by drought and the consequent dust storms-- “Dust Bowl.”
“Black Blizzard”
Consumed by “Dust Bowl”-“dust pneumonia,” brown snow reaches northeast.
25% of farmers migrate out of “Dust Bowl.”
“Okies” escape thedust storms and moveto California.(Steinbeck’s novel, Grapes of Wrath)
Over speculation of stocks
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks need money
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Over speculation of stocks Stock Market Crash, 1929 --
followed by Great Depression
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks need money
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Over speculation of stocks Stock Market Crash, 1929 --
followed by Great Depression
Factories lay off workers, no insurance
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks need money
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Over speculation of stocks Stock Market Crash, 1929 --
followed by Great Depression
Factories lay off workers, no insurance
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks close as people make a “run on the bank” to take money out
Banks need money
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Over speculation of stocks Stock Market Crash, 1929 --
followed by Great Depression
Factories lay off workers, no insurance
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks close as people make a “run on the bank” to take money out
Banks need money Foreclosure of family farms, farmers not able to pay their debt in cash
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Over speculation of stocks Stock Market Crash, 1929 --
followed by Great Depression
Factories lay off workers, no insurance
Local missions sponsor soup kitchens and bread lines
Federal Reserve failed to prevent collapse of banking system in late 1920s and ’30s, severe contraction in nation’s money supply
Banks close as people make a “run on the bank” to take money out
Banks need money Foreclosure of family farms, farmers not able to pay their debt in cash
Drought in Great Plains creates “Dust Bowl.”
“Okies” escape Great Plains for
California
Cause and Effect: Graphic Practice
CAUSE EFFECT
Global- Germany cannotrepay WWI debt,
France and England
cannot repay debt
Farms foreclosures,banks need
money
Banks fail,people take money out of
banks
Factorieslay-off
workers-no insurance
Investorslose
money
1929Stock Market
Crash
German post-WWI Inflation-1 dollar worth 100,000 marks
Unable to pay war reparations.
Poor in streets of Germany
Dawes Plan and Young Plan- U.S. loans money to Germany to pay reparations, ends afterstock market crash.
What is strange about this financial arrangement?
Herbert Hoover (R)(1929- 1933)
III. Limited role of government: Hoover
Gov’t help would destroy people’s self respect
Insisted things would getbetter soon…“no one is actually starving”
Voluntary aid (neighbor helping neighbor)
Overall view:
What is the problem with Hoover’s approach?
Tariff Act of 1930 or Hawley-Smoot Tariff- High protective tariff that produced retaliatory tariffs in other countries, strangling world trade.
Bad Decisions:
Reconstruction Finance Corporation (RFC)-Loans to banks and business, appeared as though Hoover only willing to help the rich.
People blame Hoover for Great Depression: Shantytowns = Hoovervilles Empty pockets = Hoover flags Newspaper = Hoover blankets
Hooverville
“Bonus Army” Incident- 20,000 WWI vets protest in D.C. They want pensions. There is a few violent skirmishes and army is called out to drive them out.
Hoover’s reputation gets worse….
Write a letter to President Hoover explaining how you feel about the “Bonus Army” incident and what you think he should do to solve the problems of the Great Depression.
Hoover (R) FDR (D)
Election of 1932
Why did FDR win by such a wide margin in 1932?
FDR offered a NEW DEAL for the American people.
(Jan-March 1933)Wait for FDR to come into office…
IV. Active role of government: FDR
Franklin Delano Roosevelt (D)(1933-1945)
New Deal- government programs tosolve problems of Great Depressionand put people back to work.
3 “R’s” : Relief, Recovery, Reform
At inauguration, FDR rallied a frightened nation in which 1 in 4 workers were unemployed. “We have nothing to fear, but fear itself.”
Corrected unsound banking and investment practices:“Bank Holiday” Federal Deposit Insurance Corporation (FDIC)-
Insured deposits up to 5,000.
New Deal in Action:
“Fire Side Chats” reassure American people
New Deal Alphabet Soup:
Works Progress Administration (WPA)-Gov’t building projects, direct payment to people for immediate help.
Civilian Conservation Corps(CCC)-
Young men to work building roads,parks, planting trees…$ to families***Blue Ridge Parkway
New Deal Alphabet Soup:
New Deal Alphabet Soup:
National Recovery Administration (NRA)-
Gov’t set prices and limited production.
“The making of industrial policy…should no longer be left to the market place and the price mechanism but should be placed in the hands of administrative bodies.” Gardiner Means—Economist
Growing militancy of unions.Wagner Act- protected right of workers to join unions and collective bargaining and set min. wage and hours.
Agricultural Adjustment Administration (AAA)-Recovery programs were designed to bring nation out of depression over time. Crop subsidies.Educational programs to promote soil conservation.
Social Security Act - Offered safeguards for workers,unemployment insurance, aid to disabled, elderly,and dependent children.
What explains the results of the 1936 election?
Why does Democratic control of the White House mark an important turning point in U.S. political history?