The Great Depression
Causes, Effects, and How the Gov’t Reacted
Background
What is a recession?
1.
1.
2.
A depression?
Have we ever had one before the 1930s?
Causes
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Overproduction
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Installment buying/Buying
y g y g on Credit
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Problem=surpluses
Problem
surpluses
Artificially stimulates economy
Bills catch up to consumers… consumption slows or stops
Tariffs
Causes
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Stock Market Crash – Oct. 24, 1929 – Black Thursday
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Overspeculation = inflated,
inflated unrealistic prices
Prices start dropping, everyone wants out
Causes
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Stock Market Crash – Oct. 24, 1929 – Black Thursday
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Overspeculation = inflated,
inflated unrealistic prices
Prices start dropping, everyone wants out
Bank Closures
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Bad banking policies
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Banks had made risky loans and invested on stock market
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When loans defaulted and stock market crashed, banks failed
No Guarantees of deposits (not enough real money to back
“imaginary money”)
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Bank Runs
The Depression Cycle
Under-Consumption
Unemployment
Hurts Businesses
(Overproduction)
Cut wages, Hours,
Workforce
Farming During the Depression
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People spending/eating less
Farm surpluses = lower
prices
Farmers can’t p
profit and fail
Ironyy = Farmers destroyy
their crops or don’t plant to
drive up prices – all the
while,
hil people
l starve
t
Families during the Depression
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¼ of families unemployed
Women and teenagers,
teenagers definitely not working
Some families fed children every other day
“Wear
Wear it out,
out make it do,
do eat it up
up”
Cities during the Depression
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Homelessness, Hunger,
Unemployment
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Soup
p Kitchens
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The Wild Lifestyle
y of the
20s yielded to more
conservative ways of living
and
d dressing
d
i
Minorities during the Depression
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Blamed for Depression
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Targeted by Hate Groups
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1st ones fired, Last ones
hired
Government Reaction
Hoover 1929-1933
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Trickle Down Theory
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Gov’t helps
p businesses
Businesses hire more
workers & raise wages
Franklin D. Roosevelt 1933`
Priming the Pump
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Gov’t ggives jobs
j
and $ to
workers/people
People increase
consumption
Businesses hire more
workers and raise wages
Government Reaction
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Early Depression – No gov’t help to people.
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Hoover resists idea.
idea Thought people would become
dependent on Gov’t.
FDR elected in 1932
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Proposes a “New Deal” – a plan to end the Depression
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Relief
R
li f – direct
di t aid
id tto people:
l ffood,
d shelter,
h lt jjobs,
b lloans
Recovery – Aid businesses, farmers, and state governments
Reform – long term prevention plan to eliminate bad banking and
economic practices
Criticism of the New Deal
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Socialistic/Communistic:
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Deficit Spending:
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Unconstitutional:
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Not Enough:
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Didn’t really work: