Post on 22-Feb-2016
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The Great Depression (1929-40)Unit Objectives Analyze and Explain: 1. What a “depression” is 2. Causes of the “Gr. Dep.” 3. Solutions? 4. How it affected people 5. Re-shaping role of gov’t
What is a depression?• When an economy stops growing for 6
months…called a “recession”• Symptoms of a recession:
- Business failures - Unemployment rises - Homes lost - Hunger, divorce, crime
• Depression= a prolonged or particularly severe recession
A recession on steroids???•
Root Causes of Great Depression
• #1: Uneven distribution of wealth
• While the overall economy boomed in the 1920s, the wealth created by the boom flowed to only a small %...
• half of American families lived in poverty
#2: Agriculture
• Overproduction & low prices–Farmers produced more…drove
prices even lower–Farmers couldn’t make
payments on farms & equipment–Banks repossessed farms &
equip
#3: Personal Debt• New technologies, products, and
advertising techniques created a mass consumption in the 1920s
• But people bought on credit… went into debt to acquire modern conveniences (“installment plan”)
#4: Shaky Banking System• Many banks also invested
depositor’s $ in the stock market
• Many banks were unable to cope with the number of defaulted loans…simply closed their doors and went out of business
#5: Gov’t. Policy• Commonly accepted belief: “laissez
faire”– not the role of gov’t to interfere with
markets– Not much regulation (control)
The Catalyst? Stock Mkt. Crash• Many individuals investors had bought
stock “on margin”• Stock prices declining in late summer• Big sell-off on “Black Thursday” Oct.
24, 1929• Total collapse “Black Tuesday” Oct.
29th
• Many were wiped out…financially ruined
Panic and A Run on Banks• Banks were mobbed by
depositors wanting to get their money out…
• Many banks went under• Many Americans lost entire
life savings
Hoover’s response…• President Hoover stated publicly
that “the Government should not support the people.”
• Believed in “rugged individualism” (people rescuing themselves by their own efforts)
Hoover eventually acted…• spent hundreds of millions of dollars
on public works projects such as:• the construction of Boulder (later
renamed Hoover) Dam in Nevada. • The Federal Farm Board loaned
farmers money and bought up tons of their surplus crops
• Called on churches & charities to offer more help
Hoover’s response (con’t.)
• However, these policies did not go far enough to help those who needed it most, and economic conditions did not improve
HHH blamed & criticized…• “Hoovervilles: shanty towns of “houses”
made from wood scraps, newspaper, etc.