The Great Depression:

Not isolated to the US, Germany: 1923 Hyper-InflationNot isolated to the US, Germany: 1923 Hyper-Inflation

Dawes Plan (1924)Dawes Plan (1924)International Economic PolicyInternational Economic Policy

Essential Focus

Analyze: What were the social, political, and economic causes of the Great Depression?

Effects: Explain the hardship and suffering during the Great Depression

Analyze: the Effects of Presidential Policies (Hoover v. FDR) The New Deal and Its Critics

Hardship and Suffering During the Great Depression

The Depression Devastates

People’s Lives-HoovervillesBonus Army

Effects on the American Family

The Depression in Rural Areas- The Dust Bowl

Effects on African Americans

• 1. STOCK SPECULATION• The stock market: the public

invests in cos. by purchasing stocks; in return for this they expect a profit

• b/c of booming 1920's economy, $ were plentiful, so banks were quick to make loans to investors

• also investors only had to pay for 10% of the stock's actual value at time of purchase• this was known as BUYING

ON MARGIN, and the balance was paid at a later date

• this encouraged STOCK SPECULATION - people would buy and sell stocks quickly to make a quick buck

• b/c of all this buying & selling, stock value increased (Ex: G.E stock $130 $396/share)

• this quick turnover didn't aid cos. they needed long term investments so they could pay bills (stock value was like an illusion)

• unscrupulous traders would buy and sell shares intentionally to inflate a given co.'s stock value

• all of this gave a false sense of security/confidence in the American market

2. OVERPRODUCTION

• in 1920's U.S. Eco. was based on the productivity – purchasing power - employment cycle

• for many goods to be produced , purchasing demand had to be there: this resulted in high employment and a healthy economy

• b/n 1924-27, U.S. productive capacity doubled but it was b/c of technological innovation electricity and mechanical advances made for better production, but no new jobs were added to the economy

• so more consumer goods were available, but there weren't nec. more people to buy them (OVERPRODUCTION- falling prices)

THEN…. beginning in Oct. 1929Oct. 1929,

investors’ confidence dropped, leading to a market collapse

all tried to sell at once and bottom fell out of market = panic selling… (many bankruptcies as banks called in loans)

only a tiny minority of people traded on the stock exchange, but they possessed vast wealth, and the crash had a ripple effect on the economy

Black Tuesday: October 29, 1929

• October 29, known as “Black Tuesday,” orders to sell at any price swamped the stock market.

• In a matter of hours, people lost fortunes it had taken an entire decade to make.

• First National Bank executive George Barker, who had once made $22 million on the stock market in one day, claimed he lost over $15 million as a result of Black Tuesday.

• By the end of Black Tuesday, investors had lost $16 billion Cartoonist James N. RosenbergCartoonist James N. Rosenberg

THE EFFECT For the poor....... mass consumption was

already low (poor could afford to buy little)

unemployment rose no gov't assistance at first

since people could not buy, productivity was cut back = further unemp.

so w/ additional unemployment purchasing power declined again reduced productivity yet again (= ECONOMIC CYCLEECONOMIC CYCLE)

Unemployment

Purchasing Power Productivity

3. Banking and Industry Collapse

• Bank Runs: In 1929, 600 banks closed. Buy 1933, 11,000 of the nation’s 25,000 banks had closed.

• Families that had played the stock market lost all their savings, depleting banks already small on cash reserves

• Next, investors who had bought stocks on margin either could not sell their stocks at all, or were forced to sell them at a fraction of their original price. As a result, they had little or no money to repay the bank that had extended them the margin of credit.

• Furthermore, people who had not even invested in the stock market lost all the money they had deposited in the bank – because the banks had loaned out their money and could not collect on the loans

• 4. Unqual dist. of wealth• 0.1% at top owned as much as

bottom 42% of American families (42% below poverty line)

• of the 58% above the poverty line, most fell into the middle class category - they were not wealthy; they had jobs b/c of the industrialization & consumerization of the American market place

• this middle class depended on their salaries and when productivity declined they lost their jobs

• and b/c of low savings, they had to cut back on their purchases

• this decline in consumption among the middle class impacted the whole country

Four causes of the Great Depression1) Unchecked stock

speculation resulting in Stock Market Crash

2) Overproduction of goods

3) Weak and unregulated banking institutions

4) Unequal distribution of wealth

Analysis Questions:

1) Identify and describe the four causes of the Great Depression.

2) Why is October 29, 1929 known as “Black” Tuesday?3) How did people who had not even invested in the stock

market loose all the savings they had in the bank?

Essential Focus

Analyze: What were the social, political, and economic causes of the Great Depression?

Effects: Explain the hardship and suffering during the Great Depression

Analyze: the Effects of Presidential Responses and Policies: Hoover v. FDR

The New Deal and Its Critics

The Depression Devastates People’s Lives• The stock market crash signaled the beginning of the Great

Depression – the period from 1929 to 1940 in which the economy plummeted and unemployment skyrocketed• Millions of workers lost their jobs• Unemployment leaped from 3 percent in 1929 to 25 percent in 1933• One out of every four workers was out of a job• Federal relief programs did not exist for those who lost their jobs

and homes• Bank runs increased and banks closed their doors to prevent

massive withdrawals. Personal savings were lost.• WWI Vets marched on Washington demanding the promised Bonus

payment for services

The Depression Devastates People’s Lives

• The Depression brought hardship, homelessness, and hunger to millions

• Across the country, people lost their jobs, were evicted from their homes and ended up on the streets• Some slept in parks or sewer pipes,

others built makeshift shacks out of scrap materials.

• Before long, numerous shantytowns – little towns consisting of shacks – sprang up

• People called shantytowns “Hoovervilles” to express their distrust with the president during the depression, Herbert Hoover.

The Depression Devastates People’s Lives• Difficult for some families to

provide basics like food, clothing, housing- creative solutions required.

• Soup kitchens offering free or low-cost food and bread lines, or lines of people waiting to receive food provided by charitable organizations or public agencies, became a common sight.

Analysis Questions4) Define the Great Depression.5) How many workers were out of a job in 1933? 6) Why did WWI Vets march on Washington? 7) Why did people call shantytowns Hoovervilles?8) What role did soup kitchens and bread lines play in the Great

Depression?9) What strategies did families adopt to survive this period?

The Depression in Rural Areas• With falling prices and rising debt, thousands of farmers lost

their land• Between 1929 and 1932, about 400,000 farms were lost

through foreclosure – the process by which a mortgage holder takes back property if an occupant has not made payments

The Depression in Rural Areas• The Dust Bowl

• A drought began in the early 1930s which wreaked havoc on the Great Plains• Farmers had exhausted the land through overproduction of crops – the land became

unsuitable for farming • Wind scattered the topsoil, exposing sand and grit underneath• The dust traveled hundreds of miles • The region that was hardest hit, including parts of Kansas, Oklahoma, Texas, New Mexico, and

Colorado became known as the Dust Bowl and many moved on due to foreclosures. • Thousands of farmers and sharecroppers left their homes being moving to places like

California and other Pacific Coast states “Okies”

Analysis Questions

10) What caused the Dust Bowl?11) What areas were hardest hit by the Dust Bowl?12) How did foreclosures impact the farming communities?

Effects on the American People Video

• Video in class

Effects on the American Family• Difficultly coping with

unemployment• Delayed marriages, higher birthrates,

greater homeless population• Women who had jobs became the

targets of enormous resentment – many people believed that women, especially married women, had no right to work when men who were unemployed.

• Children also suffered during the 1930s. Poor diets and lack of money for health care led to serious health problems. Failing tax revenues also cause school boards to shorten and even close schools.

• Creative solutions required.

Analysis Questions

13) Describe three effects of the Great Depression on the American family.

Effects on African Americans• Although the suffering of the

1930s was severe for many people, it was especially grim for African Americans • In 1932 the unemployment

rate among African Americans stood at over 50 percent, while the overall unemployment rate was approximately 25 percent.

• The NAACP and similar organizations faced a set back in post war civil rights.