crash and depression chapter 15 1929 - 1933. setting the scene october 29, 1929 crash!
TRANSCRIPT
Crash and DepressionCrash and Depression
Chapter 151929 - 1933
Setting the SceneSetting the Scene October 29, 1929
CRASH!
The Market CrashesThe Market Crashes NOTE: A stock’s value
SHOULD be based on the company’s earnings and assets.
BUT: Demand and speculation can make a stock price go up even more.
Think of auctions
The Market CrashesThe Market Crashes Leads to OVERVALUED
stocks. Then, if you borrowed
money to get the stock …
CRASH
Example:Example: The value of the swan beanie
baby is $5. BUT you’ve seen these go on
eBay for $150. The price is $150 for the
beanie baby swan. Others go for even higher.
You borrow $150 from a bank to buy the beanie baby.
20% interest ($30) total $180.
ExampleExample You have a $180 beanie
baby. What happens when
people no longer want to pay that much?
The price goes down to $5?
YOU ARE BROKE and OWE MONEY!
October 29, 1929October 29, 1929 THAT is what happened
to ALL stocks.Investors lost moneyBusinesses lost profitsWorkers were laid offBanks who had loaned money failed when people couldn’t pay back their loans.
October 29, 1929October 29, 1929 Because investors were
consumers – they had NO money to buy things.
Businesses couldn’t sell products.
Laid off workers. Who couldn’t buy things
then. Businesses failed.
Black Tuesday: October 29, 1929Black Tuesday: October 29, 1929 To stop the panic of
Thursday, bankers pooled their money to buy up stocks to make things look stable for Friday and Monday
October 29, 1929October 29, 1929 Because investors
couldn’t pay loans back to banks ..
Because businesses couldn’t pay back loans to banks
Because banks had also been speculating on the stock market with savers’ money …
October 29, 1929October 29, 1929 Banks are rumored to be
failing Bank runs to try to get
money out of banks. But THERE WAS NO
MONEY! BANKS FAIL and close.
October 29, 1929October 29, 1929 Because Americans have no
money to investGlobal investments fallUnemployment happens in other countriesThe rest of the world can not afford US goodsEurope can’t pay off their war debts to US businessesCloses more US factories
People asked “How did this happen?”People asked “How did this happen?” Black Thursday:
Some banks and brokers began to call in loans after stocks began to fall in value.People who had bought General Electric at $400 had to sell for $283.In one day $3,000,000,000 was lost!
Black Thursday: October 23, 1929Black Thursday: October 23, 1929 4 – 8 million shares of
stock were sold. Reassurances from
stock specialists and the President.
“The nation’s business is on a sound and prosperous basis.”
October 29, 1929: The Great CrashOctober 29, 1929: The Great Crash It wasn’t enough! Tuesday – people
panicked. 16 million shares were
sold. When there is more
supply than demand PRICES GO DOWN, DOWN, DOWN, DOWN
October 29, 1929: The Great CrashOctober 29, 1929: The Great Crash Overall losses
$30,000,000,000 The business cycle – a
period in which the economy grows then contracts.
The Ripple Effect of the CrashThe Ripple Effect of the Crash Someone who thought
and lived like they had a million dollars
Found out they only had $100.
Ripple Effect on the EconomyRipple Effect on the Economy Risky loans hurt banks
Banks earn their profits on the interest they earn for loaning out money.Gave out HUGE amounts of loans on very risky loans.
Ripple Effect for the economyRipple Effect for the economy Consumer borrowing:
Banks also make money on loans they make to consumers to buy cars, appliances, etc.Consumers lost money and / or their jobs and could not pay their debts to the bank.
Ripple Effect on the EconomyRipple Effect on the Economy Bank Runs:
People rushing to the bank to get their money out.Banks didn’t have enough money in the vaults to give people withdrawing.Banks had to call in loans to get some money.Consumers and businesses did not have the money
Ripple Effect on the EconomyRipple Effect on the Economy Savings wiped out
By 1933 9 million savings accounts had vanished.
Ripple Effect on the EconomyRipple Effect on the Economy Cuts in Production
Businesses had no money to keep producing goods.Few people had the money to buy goods.
Ripple Effect on the EconomyRipple Effect on the Economy Rise in unemployment
Businesses laid off workers.
Ripple Effect on the EconomyRipple Effect on the Economy Further cuts in
production as unemployment grew and incomes shrank, consumers spent less and less money and businesses produced still fewer goods.
Economic ContractionEconomic Contraction An economic decline
marked by falling output of goods and services.
THE GREAT DEPRESSION
– Lasted until 1941
The Great Depression: Impact on Workers and Farmers
The Great Depression: Impact on Workers and Farmers August 1931 – Ford
closed its Detroit factories.
75,000 unemployed in one day.Millions others unemployed.
The Great Depression: Effect on Workers and Farmers
The Great Depression: Effect on Workers and Farmers Because large factories
closed – small businesses and restaurants began to fail too.
No customersNo merchandiseRich people laid off staff
The Great Depression: Effect on Workers and Farmers
The Great Depression: Effect on Workers and Farmers Farm prices that were
already low, fell even more.
1929: 1 bushel of wheat was $1.18
1932: 1 bushel of wheat went for 42 cents
DISASTER FOR FARMS
The Great Depression: Underlying CausesThe Great Depression: Underlying Causes Unstable economy Overspeculation
Optimism was more than real value for goods.
Government policiesToo late, the government in 1929 tried to stop the overspeculation.Only made it worse.
HoovervillesHoovervilles How did people “get by”?
Houses with extended families.Drifted as hobos, migrant workersShantytowns “Hoovervilles”
HoovervillesHoovervilles
Depression’s Effect on HealthDepression’s Effect on Health “No one has starved.”
President Hoover
Effect on HealthEffect on Health But some did. Thousands went hungry. Poor, hungry and without
shelter – more prone to illness.
Particularly children.
Impact on HealthImpact on Health In the country, people grew
food. Used for food and to barter for other goods.
In the cities, sold apples and pencils.
Begged for money and food. Fought over restaurant
garbage.
Stress on FamiliesStress on Families Men felt like failures for
not providing for families. Women were often fired
for “taking” jobs from men.
Particularly if married Women took low-paying
jobs as domestics.
Discrimination IncreasesDiscrimination Increases Times created hostilities
against minorities.Whites were willing to take the low wages of Asian-Americans, Hispanics and African-Americans.Mass deportation of Mexican-Americans – even though they were born in the USA!
Discrimination IncreasesDiscrimination Increases The Scottsboro Boys
Nine African-American boys riding the rails were accused of raping two white women in Scottsboro, Alabama in 1931.Eight were sentenced to die.YEARS before their convictions were overturned.
President Hoover’s Response?President Hoover’s Response? Said if Americans had
“confidence” things would get better.
Blamed other countries not the American economy.
Tried to tell people the factories would quickly reopen.
President Hoover’s ResponsePresident Hoover’s Response Voluntary Action
Let volunteer organizations like church charities and local governments help people.It wasn’t Washington’s job to support and help people.
President HooverPresident Hoover After 1931, he did try
SOME federal programs to help people – but it wasn’t enough.
Hoover thought government aid would cause people to lose their self-respect.
Veterans March on WashingtonVeterans March on Washington 20,000 WWI vets and
their families came to Washington to try to claim “bonuses” the federal government had promised to pay in 1945.
They needed the money in 1932!
Bonus ArmyBonus Army Most were peaceful. Hoover called in the
army to drive the marchers’ out of Washington DC.
General Douglas MacArthur used force.Many were injured by gunfire, tear gas, fire.
Election of 1932Election of 1932 Republican: Herbert
Hoover Democrat: Franklin D.
Roosevelt Who do you think
won???
Election of 1932Election of 1932 Electoral Map