Causes of the Great Depression

What would be your plan to save the country if you were president during the Great Depression?

Warm-up

Tests returned Unit 2 Test Thursday March 10th Unit 2 Debate Wednesday March 9th

Wrap-up of yesterday

Announcements

Government involvement in the economy is always a good thing for the consumers (or people of a country).

Unit 2 Debate Topic

Sherman Anti-Trust: This was passed in 1890 and

made trusts illegal People felt that Big Business

leaders were getting too powerful and making too much money

It was meant to limit the power of Big Businessmen, but didn’t work out that way.

Big Business lawyers turned the law around to prosecute striking unions

This means that Big Business would say that strikes by unions (groups of people who all work for the same business; it protects the rights of the workers) were breaking this act.

Questions Broken Down1.)The Sherman Anti-Trust act didn’t work.

How could Big businesses be regulated without too much government intervention?

2.) Do you think the government should have any say in big business? When should the government be involved? When should it stay out of business?

Sherman anti-trust cartoon

Standard Oil was a one of the largest monopolies in the early 1900s.  1. Describe what is going on in this cartoon.  2. Why do you think Standard Oil is an octopus? 3. What are in the tentacles of the Octopus?  4. How does the Octopus represent a monopoly?  5. Did the author of the cartoon support standard oil or not?

Rise of Unions In order to combat the poor working

conditions in factories, unions began to form.

Unions are groups of workers that come together to collectively bargain for work hours, pay and other working conditions.

Use your Unions worksheet and your yellow textbook to learn more about unions. Complete the definitions and key points only!

Question of the Day Can the government regulate how a

company does business? What are positives and negatives of this type of government intervention?

What was the role of Laissez-Faire economics in the start of the Great Depression?

Question of the Day

Lots of spending that people couldn’t afford.

Rise of credit cards

New technologies

Consumerism

What was life like in the 1920s?

The Stock Market is where you buy and sell stocks (which are parts of a company).

An individual stock is a share. You buy the share at a certain price and

then hope that the price goes up so that you can sell it for a profit.

Stocks go up because a company is thought to be Profitable

What is the Stock Market?

Unequal distribution of income- some people have a lot of money while others have none

Buying on credit-using credit cards and then not being able to pay it back

Buying stocks on margin-borrowing money to buy stocks and hoping they rise

Inflated real estate prices-houses are selling for more than they are worth

Overproduction in industry and agriculture- we made and grew more than we could sell

Causes of the Great Depression

In the days leading up to "Black Thursday”, the market was severely unstable.

There were periods of high selling split up by rising prices and recovery

On Black Thursday the Stock Market dropped 13%

Stock Market Crash of 1929

Crowd on Wall Street Right after the Crash

Floor of the Stock Exchange

People after the Crash

Banks take in money when you or other customers make deposits into your savings account

Banks then use the money you’ve deposited (put in) into a savings account in order to give loans to other people

Loans are re-paid, and you can still get your money out of savings

How Banks Work

Definition: When banks take in deposits that they don’t then loan out. This means your money stays in the bank.

Bank Reserves

A Fractional Reserve banking system: this means that banks take in money and lend it out. There isn’t even enough money –in cash—in the bank for everyone to take all their money out—the bank’s already lent it out to other people in the form of loans

U.S. Reserve System

Loans are when you borrow money from the bank. The banks lends you the money, which they got from people who deposited their savings.

People usually spend loan money right away, on things like homes, cars, or college payments.

Loans

Because only a small fraction of the bank’s customers’ deposits are kept on reserve (in the actual bank) not everyone can get their money out in cash in one day.

This usually isn’t a problem, but WAS during the Great Depression

Withdrawals

This occurred during the Great Depression, when banks could not meet the demands of people who wanted all their money back in cash

Remember, banks had given out that money in the form of LOANS, which take time to pay back

Bank Failure

A situation where all the depositors (bank customers) go to the bank in order to get their money back at the same time.

The bank does not have enough cash due to having lent it out in loans to give everyone their money

Bank Run

Bank Runs

Bank Run

Bank runs can lead to bank panic in which people no longer trust the banks or lose confidence in them

When this happens, banks are harmed because people will no longer give them their money in savings

As people remove their money from banks, the money supply (amount of money being used) shrinks

Bank Panic

Hoover believed in Laissez-faire government.

Laissez-faire is a French term meaning “hands-off”. This means that government does not implement policies to deal with economic problems; it just lets the markets work themselves out.

The Role of Government, according to Hoover:

Hoover

Hoover tried to protect American production by getting Congress to pass the Smoot-Hawley Tariff in 1930, right after the crash of the stock market.

The Smoot-Hawley Tarriff was supposed to: Protect farmers through high tariffs, so things

from other countries could not be imported Protect American production of goods Essentially force people to buy American

Hoover’s Trade Policy: Smoot-Hawley Tariff

Hoover also believed in a “hands-off” policy when it came to how businesses were run

He initially did not support those who were out of work because he feared that Americans would become lazy

Many became resentful towards Hoover because he did not help them like they hoped he would

Hoover’s Business Policy: Laissez-Faire

Hoover believed providing money to American businesses was the best solution, so he established the RFC in 1932.

The RFC: Loaned money to businesses and banks to

keep them in operation Saved many corporations Spent money on public works projects, like

building hospitals, roads, and schools

Reconstruction Finance Corporation (RFC)

The Agricultural Marketing Act was passed in 1929. This established the Federal Farm Board, which bought surplus crops and made prices of farm products go up.

This plan ultimately failed and the Federal Farm Board spent nearly $180 million before it was ended in 1933

Hoover & Farming

Hoover tried to give indirect aid to homeowners who were at risk of losing their homes

In 1932- he supported the Federal Home Loan Bank Act, which provided money to banks, financial institutions, and insurance companies to provide mortgages.

Hoover did this in order to decrease the amount of foreclosures on homes.

Many people claimed that this was, “too little, too late”

Hoover & Housing

Shanty-towns that arose throughout five major areas in the US due to the amount of people without homes

These were named for and blamed on President Hoover

Hoovervilles

Veterans of WWI suffered greatly during the Great Depression

1924- before the Depression- Congress had passed the Bonus Bill; this said that all WWI veterans dwould receive payments, an the money would be put into a fund until 1945.

The depression really hurt many veterans, so they demanded the money right away.

Congress passed a bill to loan veterans up to 50% of their money.

Veterans were so angry that they marched on Washington and protested; they did not receive their money and a riot began.

The Bonus Army

Franklin Delano Roosevelt was governor of New York and ran for president in 1932.

He promised direct aid to the people of the United States and won the election of 1932.

When he got into office in 1933 he promised to create drastic change in his first 100 days.

Background on FDR

Roosevelt did not believe in Laissez-faire economics.

He believed in Keynesian economics which states that the government must get involved in the economy to stabilize it and re-start it in times of trouble.

Roosevelt’s theory

This group of programs was passed during his first 100 days in office and was called the New Deal

The New Deal was FDR’s plan to end the depression.

Roosevelt’sResponse

Roosevelt started a series of programs to directly aid Americans.

He created the Federal Deposit Insurance Corporation (FDIC) to protect bank accounts from failing banks.

He also went after unfair business practices like monopolies by creating the National Industrial Recovery Act.

Roosevelt’s Programs

In addition he created the Tennessee Valley Authority (TVA) and the Civilian Conservation Corp (CCC) that provided jobs to unemployed workers.

They created public works projects like providing electricity and provided rural workers with more stable jobs.

Roosevelt’s programs (continued)

Roosevelt moved along in the right direction and was more effective than Hoover.

We will learn however that the Depression does not completely end until the start of World War II in 1939.

Was Roosevelt Effective in ending the Depression?

1. What is a bank failure? 2. What is a bank run? 3. How did bank panic contribute to the

collapse of the nation’s banking system? 4. How did Hoover respond to the Great

Depression? Was it successful? Why? 5. How did Roosevelt Respond to the great

depression? 6. Name 3 programs that Roosevelt

implemented and what each did.

Exit slip

What would have been the hardest part of living in America during the Great Depression? Why?

Warm-up

Dust Bowl- the term for the extreme dust storms and drought in the 1930s that prevented farming in the mid-western part of the United States.

Vocabulary

You will receive a sheet of paper that is either titled African American, Farmer, Railroad worker or Teacher.

You will pretend to be that person during the 1930s

Read the blurb about the person and look at their budget. Then create a new budget for the person in the 1930s.

Answer the reflection questions once you finish the budget.

Simulation

Railroad Workers faced major job cuts during the Depression.

Railroads were used far less because fewer people were traveling and there were fewer things to ship around the country.

As a result many railroad workers lost their jobs or had their wages cut severely

Railroad workers

Farmers faced dropping prices and lower-demand for their products.

Farmers also had to contend with the Dust Bowl-which was a series of large dust storms in the mid-west that forced many farmers to leave their land because they were unable to grow anything.

Farmers

Dust Bowl

African Americans were the first to be fired from most jobs.

In addition the Dust Bowl hurt many sharecroppers.

There was still high levels of discrimination so it was really hard for African Americans to get another job once they had been fired.

African Americans

Many teachers had their salaries cut because the people paying their paycheck were losing money.

They also faced more students in the classroom because many children lost their jobs as well

Teachers

Simulation

“A day went by and the wind increased, steady, unbroken by gusts. The dust from the roads fluffed up and spread out and fell on the weeds beside the fields, and fell into the fields a little way. Now the wind grew strong and hard and it worked at the rain crust in the corn fields. Little by little the sky was darkened by the mixing dust, and the wind felt over the earth, loosened the dust, and carried it away. The wind grew stronger. The rain crust broke and the dust lifted up out of the fields and drove gray plumes into the air like sluggish smoke. ..The air and the sky darkened and through them the sun shone redly, and there was a raw sting in the air. During a night the wind raced faster over the land, dug cunningly among the rootlets of the corn, and corn fought the wind with its weakened leaves until the roots were freed by the prying wind and then each stalk settled wearily sideways toward the earth and pointed the direction of the wind.”

-John Steinbeck

Grapes of Wrath Excerpts

Houses were shut tight, and cloth wedged around doors and windows, but the dust came in so thinly that it could not be seen in the air, and it settled like pollen on the chairs and tables, on the dishes."- John Steinbeck, The Grapes of Wrath, Chapter 1

“In the roads where the teams moved, where the wheel milled the ground and the hooves of the horses beat the ground, the dirt crust broke an dust formed. Every moving things lifted the dust into the air: a walking man lifted a thin layer as high as his waist, and a wagon lifted the dust as high as the fence tops, and an automobile boiled a cloud behind it. The dust was long in settling back again. “ John Steinbeck, The Grapes of Wrath, Chapter 1

Grapes of Wrath continued

Garden City, Kansas 5:15

Garden City, Kansas 5:30

1. What were the causes of the Great Depression?

2. What is a bank failure?

3. What is a bank run?

4. What is a bank panic?

5. How did bank panics contribute to the collapse of the nation’s banking system?

   

Exit Slip