The Great Depression

The Great DepressionAPPEARANCE OF PROSPERITYBetween 1922-1928 GROSS NATIONAL PRODUCT(GNP) the total value of goods and services produced in a nation during a specific period

-- rose by 30%.

**Triggered a feeling of optimism that proved contagious.-- This led to reckless activity = MORE SPENDINGAPPEARANCE OF PROSPERITYBy 1929- one in five Americans owned a car.

STOCKS ownership in a company and is sold in SHARES -- When you buy shares, you are able to buy a piece of a corporation.

- Corporation succeeds=value may rise-Corporation fails = value decreases

Faith in Business and GovernmentThe Chief business of the American people is business.-- President Coolidge

Triumph of American businesses came from the prosperity of the 1920s.Election of 1928Herbert Hoover Elected in 1928 (Coolidge decided not to run again)

Impressive record of public service -- Overseen Americas food production during World War I and directed relief efforts in Europe.

Reputation of a business-like administrator.

REALITY OF ECONOMIC WEAKNESSWealth DistributionVery unevenSmall number of people saw the wealth

1. Wealthiest 1% income rose by 60%2. Most workers saw 8%3. 70% of families had an income below the level that they needed to live.

Easy availability of credit had allowed Americans to buy cars, radios, etc. and reaching limit on credit.Credit and the Stock MarketCREDIT People bought stocks on creditMade prices rise sharply

BUYING ON MARGIN Buying stocks with loans from stockbrokers Enthusiasm grew- brokers lowered their margins for stock purchase. Gave bigger loans1929: buy stock for 10% of cost

Buying on MarginBUYING ON MARGINInvestor wants 100 shares in a company$10/share = $1,000Only pay for a portion$500Borrow other $500 from brokerPay off loan once stock sold

RISKS- Brokers could force an investor to repay their loans if the stocks value fell below a certain point.

Buying on MarginIf stock rose to $15, the $1,000 investment would rise to $1,500The investor would get back original $500, repay $500 loan, and still have $500 profit If stock fell to $5/share the sale would only be $500 which would have to be used to sell off the loan. No profit, out original $500 investment

Investors could be in big trouble if their stocks lost value suddenly.

The Federal ReserveFederal Reserve System serves as the nations central bank. -- takes actions and sets polices to regulate nations money supply.

Were not able to keep businesses from loaning money to investors.

SEPTEMBER 3, 1929Stock Market reaches its high pointMany people began to recognize signs of troubleSales began saggingRumors spread that big investors were getting ready to take money out of market

Thursday, October 24, 1929Nervous investors began selling stocksOthers noticed increased activity and joined sellingFew people willing to buy millions of stocks flooding market, stock market prices plunged, triggering greater panic to sellToward the end of the day, a number of leading bankers joined to buy stocks to prevent further collapse. FRIDAY OCTOBER 25, 1929STOCK MARKET RETURNED TO NORMAL

Some stocks gained valueMONDAY OCTOBER 28, 1929Good feelings from Friday were gone

Market sankTUESDAY OCTOBER 29, 1929Panic completely overtook the marketsInvestors dumped more than 16 million sharesAffected strongest companiesBLACK TUESDAYStock market lost $16 Billion

DUST BOWLDust Bowl was the name given to the Great Plains region devastated by drought in 1930s depression-ridden America

Oklahoma, Texas, Kansas, Colorado, New Mexicohad little rainfall, light soil, high winds

Winds easily picked up the loose topsoil and swirled it into dense dust clouds, called "black blizzards."DUST BOWLRecurrent dust storms wreaked havoc, choking cattle and pasture lands and driving 60% of the population from the region.

DROUGHT- a Period of below-average rainfall that lasted for several years.

http://www.history.com/speeches/fdrs-fireside-chat-on-dust-bowl#fdrs-fireside-chat-on-dust-bowl

Dust BowlFLEE THE PLAINS!!

Many headed west along Route 66 to California, where they settled in camps and sought work in farms and orchards.

These migrants were called OKIES, after the state of Oklahoma. -- Truly, the migrants came from a number of different states. -- INSULTING- migrants were often met by resistance and outright discrimination. IMPACT OF GREAT DEPRESSIONBANK FAILURES- banks collapsed and people panicked. A lot of their money was entrusted in savings in banks. ** In December alone, 350 banks closed.**

FARM FAILURE- Farmers produced more than they could sell, farm prices sank.

Lower prices=lower income=lose farm.

FORECLOSURE occurswhen a bank of other lender takes over ownership of a property from an owner who has failed to make loan payments.HOOVERVILLES AND HOBOESHOOVERVILLE- Neighborhoods of shacks that were in the outskirts of town or in public parks to house the newly homeless. bitter reference to President Hoover (many blamed him for depression.)

HOBOES- Homeless wanderers.

HOOVER AS PRESIDENTPHILOSOPHY-

rugged individualism. favored a federal government that played as little role as possible in the affairs of business.

ASSOCIATIVE STATEAssociative State- Voluntary partnerships between business associations and govt.

HOOVER DAM Harness the Colorado River to provide electricity and a safe, reliable water supply to a vast area that included parts of seven states. == This projects success= private business and federal government partnerships. HOW HE RESPONDED TO GREAT DEPRESSIONCOOPERATIVE- Organization that is owned and controlled by its members, who work together for a common goal.

DIRECT ACTION Reconstruction Finance Corporation- Authorized up to $2 billions in direct govt loans to struggling banks, insurance companies and other institutions. NEW ACTSmoot-Hawley Tariff Act Raised the cost of imported goods for American consumers, making it more likely that they would purchase cheaper American goods.LOSES FAVORQuestioned compassion

Unwillingness to consider giving direct relief to people became hard to understand

Billions to banks and businesses- none to individuals.