the great depression causes and impact. what is a depression? a period of severe reduced economic...
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The Great DepressionThe Great Depression
Causes and ImpactCauses and Impact
What is a depression?What is a depression?
A period of severe reduced A period of severe reduced economic activityeconomic activity
Sharp rise in unemploymentSharp rise in unemployment Decrease in consumerism due to Decrease in consumerism due to
unemploymentunemployment The October 29The October 29thth, 1929 was not , 1929 was not
the only depression the US the only depression the US suffered but it was by far the very suffered but it was by far the very worse.worse.
Stock Market Crash - Stock Market Crash - 19291929
#1 Margin Buying#1 Margin Buying– Speculators bought on margin Speculators bought on margin – Borrowed $ from stockbrokersBorrowed $ from stockbrokers– Stock became collateralStock became collateral– When stocks increased speculators sold When stocks increased speculators sold
the stock, repaid broker & profitedthe stock, repaid broker & profited– When stocks began to decline brokers When stocks began to decline brokers
called in stockscalled in stocks– When speculators couldn’t repay the When speculators couldn’t repay the
loan brokers sold the stockbrokers loan brokers sold the stockbrokers called in their marginscalled in their margins
#2 Overproduction#2 Overproduction
AKA “plague of plenty” or “great glut” of AKA “plague of plenty” or “great glut” of farm & factory goodsfarm & factory goods
Nation’s ability to produce surpassed its Nation’s ability to produce surpassed its ability to consumeability to consume
Profits of big business went to wealthy Profits of big business went to wealthy who reinvested in factories rather than who reinvested in factories rather than raising salaries & wages which would have raising salaries & wages which would have stimulated more consumerismstimulated more consumerism
Installment & credit also encouraged Installment & credit also encouraged overproduction while new technology overproduction while new technology added to unemploymentadded to unemployment
#3 International Economic #3 International Economic ProblemsProblems Remember the Dawes Plan? When US banks Remember the Dawes Plan? When US banks
were lending Germany $ so it could pay were lending Germany $ so it could pay reparations to Allies & speed recovery of the reparations to Allies & speed recovery of the postwar economy.postwar economy.
During the “bull market” when stocks were During the “bull market” when stocks were increasing banks stopped loaning as much $ increasing banks stopped loaning as much $ to Europe and loaned it instead to brokers to Europe and loaned it instead to brokers who were selling stocks on margin.who were selling stocks on margin.
This decreased international tradeThis decreased international trade Followed by high US tariffsFollowed by high US tariffs Contributed to more underconsumptionContributed to more underconsumption
#4 Restrictive Monetary #4 Restrictive Monetary PolicyPolicy
The Federal Reserve System which is The Federal Reserve System which is responsible for regulating the responsible for regulating the amount of money in circulation amount of money in circulation followed a restrictive policy that followed a restrictive policy that dried up credit.dried up credit.
Tightened the money supplyTightened the money supply
#5 Depressed Farms & #5 Depressed Farms & IndustriesIndustries
Major industries laid off workers Major industries laid off workers in ’20sin ’20s
Less $ to consume projectsLess $ to consume projects
Who Was Hurt by the Who Was Hurt by the Depression?Depression? Speculators & long term investorsSpeculators & long term investors Overnight they went from millionaires to Overnight they went from millionaires to
paupers – in a few months stock prices fell paupers – in a few months stock prices fell 75%75%
Joke at the time about guests checking in at Joke at the time about guests checking in at a home “For sleeping or jumping?” a home “For sleeping or jumping?”
Regular “innocentRegular “innocent” people” people who put their who put their savings in banks. savings in banks.
Banks had lent $ to brokers, when margins Banks had lent $ to brokers, when margins weren’t repaid they lost everythingweren’t repaid they lost everything
Banks were not insured at the time like todayBanks were not insured at the time like today
Depositors Waiting to Depositors Waiting to Withdraw their savingsWithdraw their savings
Failure of the BanksFailure of the Banks
Hoover’s Initial ResponseHoover’s Initial Response
His response was consistent with His response was consistent with Republican philosophy – minimal gov Republican philosophy – minimal gov interference in the economyinterference in the economy
However….However…. Asked business leaders for a pledge Asked business leaders for a pledge
not to cut wages or production of not to cut wages or production of goodsgoods
Suggested that city & state govs fund Suggested that city & state govs fund bldg projectsbldg projects
Agric Marketing Act & Farm Board (?)Agric Marketing Act & Farm Board (?) Farmers lost their mortgagesFarmers lost their mortgages
Depression WorsensDepression Worsens
1929 23,000 businesses failed; 32,000 1929 23,000 businesses failed; 32,000 in 1932in 1932
Average income in 1929 was $2300 Average income in 1929 was $2300 reduced to $1600 by 1935reduced to $1600 by 1935
Unemployment in 1929 was 5% and Unemployment in 1929 was 5% and rose to 25% by 1932rose to 25% by 1932
Bread lines, soup kitchens, HoovervillesBread lines, soup kitchens, Hoovervilles Brother Can You Spare a Dime? Yip Brother Can You Spare a Dime? Yip
HarburgHarburg
Soup KitchenSoup Kitchen
Food linesFood lines
PovertyPoverty
Bread Line - NYCBread Line - NYC
HoovervillesHoovervilles
Too Little Too LateToo Little Too Late
Hoover reluctantly agrees to intro Hoover reluctantly agrees to intro new gov programs.new gov programs.
Reconstruction Finance Corp – largest Reconstruction Finance Corp – largest fed’l program ever at that timefed’l program ever at that time
Authorized to dispense $2 billion – Authorized to dispense $2 billion – supposed to have trickle-down effectsupposed to have trickle-down effect
Emergence Relief Act - $300 m to Emergence Relief Act - $300 m to states on verge of bankruptcystates on verge of bankruptcy
Neither successful Neither successful
Bonus Army 1932Bonus Army 1932
Veterans of Great War were promised Veterans of Great War were promised a bonus payment in 1945a bonus payment in 1945
Veterans organized the march to Veterans organized the march to lobby for early paymentlobby for early payment
Very well disciplined & organizedVery well disciplined & organized Agreed to honorable code of conductAgreed to honorable code of conduct By the time they reached DC there By the time they reached DC there
were 1700were 1700 Senate rejected the billSenate rejected the bill
Aftermath Aftermath
Most veterans returned homeMost veterans returned home About 2000 remainedAbout 2000 remained Hoover dispatched Douglas McArthur Hoover dispatched Douglas McArthur
& his aide Eisenhower to force & his aide Eisenhower to force veterans outveterans out
Cavalry, infantry, tanks, machine Cavalry, infantry, tanks, machine guns were presentguns were present
Torched the “Hoovervilles”Torched the “Hoovervilles” 100 people injured100 people injured 1 Child killed from tear gas1 Child killed from tear gas
Bonus Army Encampments Bonus Army Encampments 19321932
Bonus Army Asks for Bonus Army Asks for Early ReliefEarly Relief
US Army Uses Force to US Army Uses Force to Disperse Bonus ArmyDisperse Bonus Army
US Army Torches US Army Torches CampsCamps
Hard times a “hoovering”Hard times a “hoovering”
Impact of the Bonus Impact of the Bonus MarchMarch Political suicide for Hoover – seen Political suicide for Hoover – seen
as bullyas bully ““Nailed his coffin shut”Nailed his coffin shut” Press commented “What a pitiful Press commented “What a pitiful
spectacle that the American spectacle that the American Government, mightiest in the Government, mightiest in the world, chasing unarmed men, world, chasing unarmed men, women and children with Army women and children with Army tanks.”tanks.”
The End Section 1The End Section 1