The Great Depression

1929-1941

1st CAUSE OF THE 1st CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

1st CAUSE OF THE 1st CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

•An old decaying industrial base•Outmoded equipment made some industries less competitive

Industry in TroubleIndustry in TroubleIndustry in TroubleIndustry in Trouble•Textiles•Steel•Railroads•Mining and Lumbering•Automobiles•Construction

The miner says,

“Uh Oh…”

2nd CAUSE OF THE 2nd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION2nd CAUSE OF THE 2nd CAUSE OF THE

GREAT DEPRESSIONGREAT DEPRESSION•A crisis in the farm sector

•Farmers produced more than they were able to sell, especially with the demand of WWI and the disappearance of markets that the war had opened to them

Farmers in TroubleFarmers in TroubleFarmers in TroubleFarmers in Trouble•During WWI

•International demand for food crops soared•Prices Rose

•Farmers took out loans to buy more land and equipment

Farmers in TroubleFarmers in TroubleFarmers in TroubleFarmers in Trouble•Post WWI

•Prices and demand fell•To compensate for lower prices farmers boosted production

•Too much infiltrated the market

•PRICES FELL $

McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill

1. The government would buy from farmers surplus crops at guaranteed prices that were higher than the market rate  

2. The government would then sell these crops on the world market for the lower prevailing prices

McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill

3. To make up for losses caused by buying high and selling low, the government would place a tax on domestic food sales, thus passing the cost of the farm program along to consumers

McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill

McNary-Haugen BillMcNary-Haugen BillMcNary-Haugen BillMcNary-Haugen Bill•Congress passed 2x•Coolidge vetoed the bill 2x

•“Farmers have never made money. I don’t believe we can do much about it.”

3rd CAUSE OF THE 3rd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

3rd CAUSE OF THE 3rd CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

•The availability of easy credit•Many people went into debt buying goods on the installment plan

Living on CreditLiving on Credit•Americans buying beyond their means

•Purchased goods on CREDITCREDIT•An arrangement in which consumers agreed to buy now and pay later for purchases

•Credit easily available•BUT Hard to pay off debts

4th CAUSE OF THE 4th CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

4th CAUSE OF THE 4th CAUSE OF THE GREAT DEPRESSIONGREAT DEPRESSION

•An unequal distribution of income

•There was too little money in the hands of working people who were the vast majority of consumers

Less Money to SpendLess Money to Spend•Everyone’s income fell

•Americans buying less•Rising Prices•Stagnant Wages

UNBALANCED DISTRIBUTION OF INCOME

UNBALANCED DISTRIBUTION UNBALANCED DISTRIBUTION OF INCOMEOF INCOME

•½ the nation’s families earned less than $1500/year•1920-1929

•Income of the wealthiest 1% rose 75%•Poorest 40% of the population earned just over 1/10 of the national income

Speculation:The engagement in risky business transactions (buying or selling stocks) on the chance of quick or considerable profit

And the Stock Market Came Tumbling Down

Buying on Margin:Paying a small percentage of a stock’s price as a down payment and borrowing the rest

And the Stock Market Came Tumbling Down

October 24, 1929

Stock market took a bad fallPanicked investors unloaded their

shares

Going, going…gone…Going, going…gone…

October 29, 1929People and corporations frantically

tried to sell their stocks before prices plunged even lower

Those who had purchased stocks on credit acquired huge debts when

stock prices plunged

BLACK TUESDAYOctober 29, 1929

Many who had invested entire savings in the market lost

everything

16 million shares dumped

This is a scene of the Toronto Stock Exchange the day of the crash.  Immediately after this picture was taken, the income of almost every single Canadian family was cut by more than half. The disappearance of national

resources meant a total economy collapse. The fisherman stopped going out to sea, workers connected

with the fish market were laid off or had fewer working hours for less money.

Dow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial AverageDow Jones Industrial Average

•Barometer of the Stock Market’s health

•Measure based on stock prices of 30 representative large trading firms trading on the NYSE

Alcoa 3M Altria (Philip Morris) American Express Boeing Caterpillar Citi Group Coca Cola E.I. DuPont de

Nemours Exxon Mobil General Electric General Motors Hewlett-Packard Home

Depot Honeywell Intel International Business Machines JP Morgan Chase

Johnson & Johnson McDonalds Merck Microsoft Proctor and Gamble SBC

Communications United Technologies Wal-Mart Stores Walt Disney

Financial CollapseFinancial CollapseFinancial CollapseFinancial Collapse•Many Americans panicked (wouldn’t you?!!) and tried to withdraw all of their money from banks•Banks forced to close because they could not cover their customers’ withdrawals

•Banks lost money in the crash, too

Financial CollapseFinancial CollapseFinancial CollapseFinancial Collapse•Economy went into a tailspin•Unemployment rose dramatically

•1929•3% of workforce unemployed

•1933•25% of workforce unemployed

Some Folks Did Ok…Some Folks Did Ok…Some Folks Did Ok…Some Folks Did Ok…•Joe Kennedy made all of his money during the weeks just before the Crash•Some held onto their jobs

•Endured pay cuts•Endured fewer work hours

$$$$$$$$$$$$$$$$$$$$$$$$

Shockwaves Throughout Shockwaves Throughout the Worldthe World

Shockwaves Throughout Shockwaves Throughout the Worldthe World

•Europe still recovering from WWI•USA limited Europeans from exporting their goods

•THEREFORE, IT BECAME MORE DIFFICULT TO SELL US GOODS ABROAD

Hawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffThe most ridiculous sounding name for a tariff ever

•Highest protective tariff in history•Designed to help US farmers and manufacturers by protecting their products from foreign competition

Hawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffHawley-Smoot TariffBACKFIRED:•Reduced number of European goods into USA•Prevented other countries from earning US currency to purchase American exports•Countries reacted by raising their own tariffs•Reduced overall economic activity

Gold Standard•Britain and other European countries went off the Gold standard

•Paper money could no longer be exchanged for gold

•Gold dropped in value•Europeans began to purchase US goods and repaying loans in cheaper currency

Gold StandardToday, money is based on

“full faith and credit”

We accept dollars because:1.They are legal tender2.They are backed by the world’s

confidence in the US government

UnemploymentUnemploymentUnemploymentUnemployment

TownsTowns

Poverty and Poverty and FamiliesFamilies

Poverty and Poverty and FamiliesFamilies

Dust BowlDust BowlDust BowlDust Bowl

MigrantsMigrantsMigrantsMigrants

ShantytownsShantytownsShantytownsShantytowns

How the Other Half Lived…

Virginia Mansion

The Manor House (Long Island)

Springwood Mansion (FDR’s Home)

The Chimneys (Long Island)

Vanderbilt Mansion