The Great Depression:(Or, how Americans were mostly to

blame for a messed up global economy)

SWBAT: Identify the causes of the Great Depression.

Homework: Read pages 738-42 and complete the chart.

Do Now: Imagine for a second that you went from living in picture 1 to living in picture 2. How would that make you feel? What kind of problems do you foresee living in picture 2?

Postwar America

Post-war America was a very different place than the rest of the world.

Because America was untouched by fighting and destruction, no rebuilding had to be done.

World War I also sparked a boom in the economy as factories had to meet the demands of a warring nation.

Cultural Changes in America

Women began wearing less clothing and doing things that men traditionally did like drive cars, smoke cigarettes, and drink.

Music and dance changed and jazz became popular first in the US and then around the world.

People began frequenting movie theatres and sports complexes to watch baseball.

But most importantly, America became a society driven by consumer culture.

PROBLEMS LEADING UP TO THE CRASH

Consumerism

As the economy improved more people began purchasing goods.

The price of many goods once considered luxury items (like cars) dropped significantly.

This was further influenced by mass media advertising.

Companies also began allowing consumers to purchase goods on credit.

Buying on Credit

Previously, if you wanted a large ticket item (i.e. a refrigerator, car, or washer machine), you saved up to be able to purchase the item outright.

Buying on credit allowed people to purchase the item, but pay using installment plans.

However, it wasn’t just large ticket items people were buying on credit. People often purchased stock in the stock market on credit too.

This is known as buying on margin.

Buying on Margin

What it means: the buyer would put down some of his own money, but the rest he would borrow from a broker. the buyer only had to put down 10 to 20 percent of his own money

and borrowed 80 to 90 percent of the cost of the stock. Confident in what seemed a never-ending rise in prices,

many during the 1920s bought stocks this way.

Farmers Struggle

During the war, many European farms were destroyed. Other places, like the US had to put production in

overdrive to feed everyone. These farmers took out loans to buy modern equipment

and more land. But after the war was over and the food was no longer

needed, farmers were no longer getting paid what they were during the war and now had loans to pay back.

Inflation

Because most nations were deep in debt after World War I, money needed to be created to pay debts.

Problem: many countries printed too much money and experienced inflation (money loses value and prices go up).

Economic Nationalism

Because countries wanted to protect their industries in their own countries, they set up tariffs on imported goods.

This made it hard for Europeans to sell goods on the American market, further hurting the European economy and making it harder to pay back debt.

Additionally American bankers loaned money to Europeans to purchase American goods, which drove them further into debt.

The Stock Market Crash of 1929

The economy slowed down Stock values began to fall Investors panicked and too

many people wanted to sell their stocks

Stockbrokers demanded that borrowers pay off loans People withdrew money from banks to pay off loans Many banks did not have enough money and had to close

Prices dropped further On October 29, 1929, Black Tuesday, values of stocks

“crashed” to record lows

Effects of the Great Depression

Many banks and factories closed People lost faith in the economy

People bought less and invested less Many people became homeless Unemployment was at an all time high

1/4 Americans and British jobless 2/5 Germans jobless

Different Responses to the Great Depression

The United States

Kept its democratic form of government Voters gave government more power to deal with depression

The New Deal: set of programs started by President Franklin D. Roosevelt that helped bring the U.S. out of the Great Depression The Social Security Act of 1935

Benefits for retired, disabled, and unemployed Public building projects

Created new jobs More government involvement in economy

Rules and regulations for businesses Assistance for farmers Higher taxes to pay for programs

Germany

After WWI, Germany set up a democratic government New government failed to solve economic problems Germans lost faith in democracy

During the Great Depression, Germans wanted a strong leader to help with their economic problems. Adolf Hitler: leader of the Nazi Party and dictator of

Germany from 1933-1945.

Great Britain

Kept its democratic form of government Voters elected a new political party to help the economy

economic retrenchment: cutting back on other government programs and focusing on economic improvement More government involvement in the economy

Raised tariffs to protect British businesses Cut back money supply to limit inflation Lowered interest rates on loans to encourage spending

Balanced the budget (got the government out of debt) Raised taxes and controlled government spending

Cut military spending – saved money but weakened defense ability

Activity

Unlike the rest of the world when the Great Depression hit, many Americans went from living and eating well to dire straits.

Mrs. Roosevelt received as many as 5,000 letters per day from Americans across the country asking for help.

You will read 3 of those letters and answer the questions that follow.