america’s great depressionmrgoethals.weebly.com/.../16542680/42_-_great_depression.pdfthe great...
Post on 11-Jul-2020
1 Views
Preview:
TRANSCRIPT
America’s Great Depression
The Great Depression is one of the most misunderstood
events in American history…
Some point to the Crash of the Stock Market as the cause of the Depression…
Not True
Some like to blame America’s dependency on the Gold Standard as the cause of the Depression…
Not Accurate
Some blame Herbert Hoover, claiming his “hands-off” economic policies dragged America into the Depression…
Not By Itself
America’s Great Depression
The Great Depression was a worldwide event that was interconnected to America’s
economic problems
Caused by a variety of Events
• War Debt from the Great War (1914-1918)
• Overproduction of Crops and Manufactured Goods
• American Optimism and Consumer Over-Confidence
• Dependency on the Gold Standard
• Poor Banking, Money Lending, and Investing
• Bad Political Decisions
America’s Great Depression
How did War Debt impact America?
• United States = $21 Billion plus another $5 Billion in loans to Europe
• Great Britain = $40 Billion of which $800 Million was owed to the U.S.
• France = $30 Billion of which at least $450 Million was owed to the U.S.
• Russia = $27 Billion of debt plus about $1.8 Billion owed to the U.S.
• Italy = $12 Billion of debt plus about $280 Million owed to the U.S.
America’s Great Depression
America’s ability to recoup these debts had an obvious impact on the nation’s overall economic stability
Increased Food Production during World War I was an economic “boom” for
many farmers in the U.S., Canada, and Australia, who borrowed money to enlarge and modernize
their farms.
How did the Overproduction impact America?
World Dependency on U.S. Industrial Goods and weapons increased during World War I, adding to
the economic “boom” for the United States.
America’s Great Depression
America’s Great Depression How did the Overproduction impact America?
American Agricultural Production
New Farming Methods =
American Farms Produced =
New Competition Develops =
Worldwide Problem Occurs =
Surplus Agriculture Causes =
Farmer’s Unable to Sell Crops =
Unpaid Debts Causes =
INCREASED CROPS
MORE FOOD
FOREIGN PRODUCERS
SURPLUS PRODUCTS
DROP IN PROFITS
UNABLE TO PAY BANK LOANS
WEAKENED BANKS
America’s Great Depression How did the Overproduction impact America?
American Industrial Production
American Factories Produced =
5% of US Population Control =
60% of US Families are =
U.S. Store Owners =
U.S. Factory Owners =
U.S. Factory Workers =
Unemployed U.S. Families =
1/2 OF ALL WORLD GOODS
33% OF ALL THE WEALTH
TOO POOR TO BUY GOODS
CUT BACK ORDERS OF GOODS
REDUCED PRODUCTION OF GOODS
LAID OFF WORKERS
BOUGHT FEWER GOODS
How did the Overproduction impact America?
HIGH DEMAND
for consumer goods, weapons and agricultural
products led to
OVERPRODUCTION
America’s Great Depression
America’s Great Depression How did the Overproduction impact America?
How did the American Optimism and Consumer Confidence impact America?
America’s Great Depression
• The “roaring twenties” was an era when our country prospered tremendously.
• The average output per worker increased 32% in manufacturing and American corporate profits rose 62%.
How did the American Optimism and Consumer Confidence impact America?
America’s Great Depression
• Uneven distribution of wealth didn’t stop the poor and middle class from wanting to possess luxury items, such as cars and radios…
• Although wages were not keeping up with the prices of those goods…”buying on credit” offer a solution!
How did the American Optimism and Consumer Confidence impact America?
America’s Great Depression
Popular Composers and Musicians often
reflected the economic changes!
How did the American Optimism and Consumer Confidence impact America?
America’s Great Depression
In reality:
Uneven Distribution of Wealth and Income continued to rise . . .
Because wages didn’t keep up with the nation’s rate of inflation . . . .
And the Under-consumption of American made goods here and abroad also rose.
How did the American Optimism and Consumer Confidence impact America?
America’s Great Depression
Many did not realize how severe the downturn was
until 1932, when the economy had technically “hit bottom.”
How did the Gold Standard impact America?
America’s Great Depression
• The Gold Standard was a monetary system in which all standard currency or bank notes were based on the fixed weight of gold
• Dependency on the Gold Standard limited a nation’s ability to change monetary policies or print additional currency
• In the U.S., the Federal Reserve was required by law to have enough gold to back at least 40% of all its bank notes
• In 1931, Commercial Banks converted their Federal Reserve Notes to gold, reducing the Federal Gold Reserves & reducing circulation
How did the Gold Standard impact America?
America’s Great Depression
• U.S. Banks has loaned over $150 million in gold (over 240 tons) to European Banks.
• Foreign loans became questionable when most European nations went off the Gold Standard in 1931.
• These events weakened many investors confidence in the power of the U.S. dollar.
• In 1934, Congress passed the Gold Reserve Act ordering all Federal Reserve Banks to turn over their gold supplies to the U.S. Treasury.
• The act also authorized the President to devalue the gold dollar by over 40%
How did Poor Banking Practices impact America?
• A solution to Overproduction was to let buyers purchase products on Credit.
• The concept of “buying now and paying later” caught on quickly in the United States and was “exported” abroad.
• This was the first time personal consumer credit was made available to the common citizen.
• By the end of the 1920’s, 60% of all cars in the U.S. were being bought on Credit.
America’s Great Depression
How did Poor Banking Practices impact America?
• In the 1920s, the “Federal Reserve set very low interest rates to encouraged people and foreign nations to buy on the “installment” plan (on credit.)
• More buyers meant more profit for companies, so they produced more and more… so much that a surplus of goods was created!
• In 1929, the Federal Reserve worried that growth was too rapid, so it decided to raise the interest rates and tighten the supply of money. This was a bad miscalculation!
America’s Great Depression
How did Poor Banking Practices impact America?
• Facing higher interest rates and accumulating debt, the purchases of goods began to slow down.
Buying on Credit increased PERSONAL DEBT
High Interest Rates caused LESS DEMAND for goods
The Stock Market growth in the 1920s tells a story of runaway optimism for the future.
America’s Great Depression
How did Poor Banking Practices impact America?
• Booming business caused stock prices to rise.
• Stocks were being sold on margin ($10 down for $1000)
• Banks started loaning money to stock buyers
• Wall Street started using stocks as collateral
• If stocks dropped drastically, banks would lose money
• Sudden loss in confidence caused customers to rush the banks in order to withdraw their savings
• Banks no longer had enough cash to pay customers
• Eventually, over 9,000 Banks failed (90 per month)
America’s Great Depression
America’s Great Depression
In early 1930, there were 60 bank failures per month.
Eventually, 4,000 banks closed their
doors between 1930 and 1933.
How did Poor Banking Practices impact America?
Buying on Margin was a risky market practice.
Bank loans for stock purchases
was an unsound practice.
The Stock Market Crash of 1929 was only a symptom-not the cause of the Great Depression.
The Stock Market Crash of 1929 was not a one day event, but a slowly building economic disaster
America’s Great Depression
America’s Great Depression How did Poor Banking Practices impact America?
“Black Tuesday” Oct. 29, 1929, the Stock Market crashed.
Over 16 million shares were sold in
massive selling frenzy with Losses exceeded
$26 billion.
America’s Great Depression How did Poor Banking Practices impact America?
As banks closed their doors and more people lost their savings, fear
gripped depositors across the nation.
Business also lost its money and could not finance its activities…
More businesses went bankrupt and closed their doors, leaving more people unemployed…
America’s Great Depression How did Poor Banking Practices impact America?
Unemployment, 1929-1942
America’s Great Depression How did Poor Banking Practices impact America?
Men lined up a Soup Kitchens in Cities across the county, 1930’s
How did Bad Political Decisions impact the America?
• The Dawes Plan: An Attempt to help Germany pay reparations after the Great War
$800 Million in loans from the U.S. would be granted to help bolster Germany’s economy
Reparations would be paid gradually starting at 1 Million Marks the first year, increasing by 2 ½ Million annually after the first five years.
The Allies would help reorganize the German Reichsbank (National Bank)
Sources for reparations money would include transportation, customs, and excise taxes
America’s Great Depression
How did Bad Political Decisions impact America?
• The Smoot-Hawley Act: U.S. Tariffs established to control foreign trade
Greatest Mistake of the Hoover Administration
Raised tariffs on foreign goods up to 50%
European partners retaliated with like tariffs
Everyone forgot the principal of successful International Trade: It’s a Two Way Street
International Trade declined 33% with devastating effects on all nations involved
America’s Great Depression
America’s Great Depression How did Bad Political Decisions impact America?
For example, American farmers lost 1/3 of their market. Farm prices plummeted and thousands of farmers went bankrupt.
Many farmers lost their land and homes due to Bank Foreclosures
America’s Great Depression How did Bad Political Decisions impact America?
Smoot Hawley Tariff of 1930 and Trade Reform Act of 1934
0
1
2
3
4
5
6
7
1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Billio
ns o
f N
om
inal D
ollars
Exports
Imports
Impacting International Trade, Unemployment, and America’s
National Debt
America’s Great Depression How did Nature compound the problems in America?
To compound the effects of the economic slump, farmers would experience one of the worst, longest droughts in history during the 1930s…
...creating a “Dust Bowl” of unproductive,
eroded farmland.
America’s Great Depression How did Nature compound the problems in America? Dust storm, Elkhart,
Kansas, 1937
America’s Great Depression How did Nature compound the problems in America? Many farm families migrated
west in search of work as migrant farmers
“Okies” & “Arkies”
America’s Great Depression How did Bad Political Decisions impact America?
Many Americans blamed President Herbert Hoover for their plight.
“The sole function of the
government is to bring
about a condition of
affairs favorable to the
beneficial development of
private enterprise.”
Herbert Hoover (1930)
Hoover did take action to intervene in the economy, but it was too little too late-
America’s Great Depression How did Bad Political Decisions impact America?
However, Hoover actually believed in a “hands-off” free market philosophy.
Within a month of the crash, Hoover met with key business leaders to urge them to keep wages high, even though prices and profits were falling.
In June 1929, Hoover signed the Farm Relief Act.
America’s Great Depression How did Bad Political Decisions impact America?
Hoover’s greatest Public Works Project, Boulder Dam, only managed to employ a few thousand.
America’s Great Depression How did Bad Political Decisions impact America?
However, Hoover was still blamed for the remaining thousands of unemployed and homeless.
Hoovervilles and Shantytowns
America’s Great Depression How did Bad Political Decisions impact America?
Ultimately, the poor handling of the Great Depression had a marked impact on American political attitudes.
Roosevelt Campaigning for Office in Kansas 1932
America’s Great Depression How did Bad Political Decisions impact America?
WWI Veterans even demanded payment of promised
benefits due to the economic crisis.
Bonus Army
America’s Great Depression How did Bad Political Decisions impact America?
A Major Electoral Shift
between 1928 and 1932
Great
Crash Investor
s Businesses
and Workers Investors lose
millions.
Businesses lose
profits.
Consumer spending drops.
Workers are laid off.
Businesses cut
investment and
production Some fail.
Banks
Businesses and workers
cannot repay bank loans.
Savings accounts
are wiped out.
Bank runs occur
.
Banks run out of money
and fail.
World Payments
Overall U.S.
production plummets.
U.S. investors
have little or no money to invest.
U.S. investment
s in Germany decline.
German war payments to Allies fall
off.
Europeans cannot afford
American goods.
Allies cannot pay debts to United States.
Effects of the Crash
America’s Great Depression
America’s Great Depression The Legacy
top related