The Great Depression
Economic Collapse
Heredowe
see
a billboard
depicting
American
What
you
think
those
who
live
in
the
area
think
of it?
How
Why
Who
What
What
would
do
domessage
you
you
isWhat
you
the
think
think
describe
irony
do
does
the
designed
you
inthe
area
the
seebillboard
surrounding
is
photograph?
here?
the
so run
billboard?
send?
down?
area?
prosperity in a run-down, barren area.
The Postwar Economic Boom

Years following WWI are known as the
“Roaring Twenties”


Hoover said we had “come nearer to the abolition of
poverty…than ever before”
Effects on society




Americans earning more than ever – 43% increase
More money for luxuries – Americans owned ¾ of
all the cars in the world
Increase in production – prices lower
Stock market at all-time high by 1929 – experts
advised people to invest as much as they could
The Depression Foreshadowed

By late 1929, there were cracks in the US
economy




Unemployment on the rise
Farmers losing land
Stock prices dropping
Number of Americans in poverty increased
The Stock Market Crash


THE STOCK MARKET CRASH DID NOT
CAUSE THE 10-YEAR-LONG GREAT
DEPRESSION!
There are six factors historians generally agree
on:






Domestic and international economic policy
Unchecked stock speculation
Weak and unregulated banking institutions
Overproduction of goods
Decline of farming industry
Unequal distribution of wealth
Based
onseewhat
you know
about
conservatism,
howAndrew
do you
Here we
Republicans
President
Coolidge,
Sec. of the Treasury
Do
These
What
you
Describe
men
think
How
isWhat
the
are
are
the
their
mood
conservative
do
the
men
Why?
you
facial
men
ofCommerce
are
see
theexpressions.
dressed?
wealthy
here?
photograph?
Republicans.
orPresident
poor?
Mellon,
and
Herbert
Hoover,
Sec.
Of
and
Future
think they dealt with business interests in the 1920s?
Republican Economic Policy

Coolidge’s Economic policy



“The business of America is business”
Policies that benefit wealthy would eventually benefit all
Americans – prosperity would “trickle down” from upper
to middle to lower classes
Andrew Mellon’s Economic policies




Slashed taxes for big business – US Steel received a $15
million refund
Cut taxes for those who made over $60,000 a year
Cut government expenditures
Raised taxes for those in the middle and lower classes
Republican Economic Policy

Trickle-down effect did not work




Businesses used income to expand work facilities,
increase production, and line their pockets
Some new jobs created, but used new machines
primarily instead of people
Owners kept workers’ wages low
Widened the gap between rich and poor
International Business Policy

During WWI, the US lent $11 billion to
European allies


After war, countries in economic ruin – appealed
to the US not to have to repay loans or reduce
amount
Coolidge’s administration refused
 Rescheduled
loan payments
 Began lending nations more money


Nations fell deeper into debt
High tariffs so that people would buy American
 Europe
had no market for goods, and couldn’t buy
American goods or invest in the economy
What
do
building
you
see
do
here?
you
What
Here
Who
Whatwe
are
does
aresee
the
they
this
apeople
political
cartoon
doing?
on
see?
cartoon
top reflect
of
thethe
ground?
called
building?
about“The
stockbrokers
Anglers” showing
duringWall
this
Streetperiod?
stockbrokers
“hooking” Americans
to invest through
speculation.
Real Estate Speculation


Speculation – a person or organization makes a
risky investment in the hope of making a quick,
large, profit – widespread in the 1920s
Many speculated on real estate



Over 1 million moved to southern California after
WWI
Prompted investors to buy up huge tracts of land
to sell to housing developers for a large profit
Boom went bust when the amount of land for sale
exceeded the demand for new homes
Real Estate Speculation

Turned to Florida





Reputation for vacation and retirement
Speculators used same tactics as in California
However, sometimes sold to other speculators,
who sold it at still higher prices
Many buyers were northerners who bought land
before they saw it
Dishonest scams – land would be alligator
infested swampland or be underwater at high tides
Stock Speculation




Investors felt stock market would go up
indefinitely and that profits would continue to
increase
The value of many companies’ stock became
artificially inflated and bore little connection to
the companies’ actual worth
Some investors used unethical practices to
inflate prices
Some economic analysts predicted the market
was headed for a fall
Here
Howwe
do see
youathink
groupthe
outside
peopleoftrying
the Union
to getBank
theirin
How
do
you
think
bank
failures
affected
the
What
they
behere?
saying?
Why
What
might
What
do
What
you
they
This
ismight
think
the
be
do
bank
crowded
building
you
theissee
people
failing.
you
around
are
see?
doing?
thenation?
bank?
New
money
Yorkare
in April
feeling?
1933.
The Stock Market Crash


Warnings from analysts made some investors nervous
Many began selling while they could still get a good
price





As investors began to withdraw, prices began to fall
Companies began to lower production, which led to price
drops
October 24, 1929 – investors flooded the NYSE with sell
orders to get rid of their stocks
Group of bankers tried to stabilize market by purchasing
investors’ stocks at a higher price than the market was
offering
Still continued its descent
The Stock Market Crash


October 28– investors sold stocks at loss of
over $4 billion
October 29 – called “Black Tuesday” – orders
to sell at any price flooded market



First National Bank executive George Baker
claimed he lost $15 million
One distraught president threw himself from hotel
after company’s stock fell from $113 to $4
At the end of the day, investors had lost $16
billion
Unregulated Banking Institutions

Stock market crash triggered collapse of US
banking industry – instability in the 1920s was
due to two main reasons:

Laissez faire (Leave alone)
 Federal
Reserve did nothing to stop banks from
speculating depositors’ money on high-risk ventures
 Didn’t make banks keep certain amount of money on
reserve and available
 Depositors money was uninsured – no way for them to
get money back after banks failed
Bank Run
Unregulated Banking Institutions

Over-extension of credit to stock investors and
brokers



Allowed investors to buy stocks on large margins
of credit
Allowed investors with little money to purchase
large amounts of stock
Put down 10-20% of total; allowed to borrow the
rest and use the stock itself as collateral
The Banking Industry Collapse


Families that had played the stock market lost all their
savings
Investors who bought stocks on margin couldn’t sell
stock at all, or had to sell at low prices




Little or no money to repay bank’s loan
Banks could not replace depositors’ money, so people
who hadn’t even invested lost all their money
Increasing number of people began defaulting on
mortgages and other loans
By 1932, ¼ of nation’s banks had closed – 6,000
banks
At the top, we see
striking dairy farmers
At
the bottom,
seea
emptying
milk we
from
Henry
Ford withtruck
his son
non-striker’s
are
the
men
on
What
How
What
These
Why
How
kinds
do
do
men
might
you
you
might
ofare
think
see
they
economic
the
Henry
here?
they
bethe
Edsel standing
next
to
during
a
blockade
near
bottom
doing?
problems
Ford
economic
spilling
and
are
topmight
feeling?
his
milk
doing?
collapse
son
on
dampen
Edsel.
the
be
the 20Illinois.
millionth
Harvard,
They
explained
the mood
Why
ground?
are
by
at the
what
theyFord
you
automobile
leave
organized
the to
blockade
see in celebrating?
these
plant?
two images?
Ford’s
production
line
to raise
prices and
on Aprilawareness
15, 1931.of
heighten
oversupply.
Overproduction of Industrial Goods




Consumer demand for goods was very high after
WWI
Newly invented machines allowed US factories
to produce more goods in less time
American industrialists believed in unrestricted
capitalism and unrestricted growth
By 1929, many companies had more plants than
they needed, and the market was saturated with
goods that few Americans could afford to buy.
Overproduction of Agricultural Goods


During WWI, American farmers supplied both
US and Europe with foodstuffs
Mechanized much of their work




Farmers became more efficient
Produced more than ever
After the war, European farmers resumed their
own production, and the demand for US goods
dropped significantly
Farmers often stuck with surplus of crops they
couldn’t sell or could only sell for a low price
What
impact
do
you
think
the
Dust
Why
do
you
think
there
are
no
people
inBowl
the
Here
weWhere
see
an
abandoned
farmhouse
surrounded
In
what
condition
are
the
wheels
in
the
foreground?
Why
What
do
might
you
do you
they
think
see
have
they
here?
gone?
left?
picture?
by
several
feet of dust
after the
a major
dust storm.
had
on farmers
during
Depression?
The Toll on the Farming Industry



Farming had historically been the backbone of the
American economy, but by 1929, the industry was in
decline
Farmers borrowed heavily to pay for new, advanced
equipment
Farmers failed to sell surplus crops and became unable
to pay back loans



Many farmers defaulted on their loans
Some lost farms to foreclosures
Bank would attempt to resell land and equipment, but
other farmers were barely able to hold onto their own
farms

Farming trouble caused many banks to collapse
Farming During the Depression




Between 1929 and 1933, farmers’ income
dropped by 50 percent
Hit with drought so severe that soil swept across
the plains in choking black clouds
The region became known as the “Dust Bowl,”
and farmers left the region in droves
Over one million families lost their farms
between 1930 and 1934
The Dust Bowl




Farmers fleeing Dust Bowl headed to California
in search of employment and land
Known as “Okies,” since many of them came
from Oklahoma
Many lived in makeshift shacks and shanties
outside city limits
One outside of Salinas, California, contained
nearly 10,000 residents
Where
How
What
What
Here
Howmight
we
How
might
are
do
dosee
you
the
you
might
their
their
apeople
see
think
wealthy
life
here?
home
the
in
be
extraordinary
couple
different
the
wealthy
center
look
arriving
from
people
like?
dressed?
wealth
that
atare
the
ofon
opera
one
the
inhand
going?
New
doorman?
and
York
lowCity
wages on
inthe
1929.
other have
contributed to the
economic collapse of
the late 1920s and
1930s?
Act-it-Out!




Fred Smith
Martha Vineyard
Henry and Leona Gotrocks
Lester Monroe
The Gap Between Rich and Poor

While Americans were more prosperous than
ever, most wealth remained in the hands of a few
at the top of the economic pyramid




1% of the population possessed 59 % of the
country’s wealth
60% lived on or below the poverty level of $2,000
Average American saw a wage increase of 9%; the
rich saw an increase of 75%
In short, the rich were getting richer