The Great Depression 1928

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The Great Depression
1928 - 1932
Causes of The Great
Depression
1. Uneven Distribution of
Wealth



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Workers output increased 32%, wages
increased 8%
Corporate profits increased 65%
60% of families earn less than
$2,000/yr.
The wealthy minority did not buy
enough to keep the economy going
2. Easy Credit


People accumulated
more and more
debt each year
80% of all radios
and 60% of all cars
purchased were
bought using credit
3. Stock Speculation/ Crash



Soaring stock prices
were based on
confidence rather
than reality of
profits
Investors continued
to buy on margin
These led to the
Stock Market Crash
Stock Market Crash



October 23, 1929 – Dow Jones drops
21% in 1 hour
October 24, 1929 – Black Thursday,
Investors lost confidence and began to
sell
October 29, 1929 – Black Tuesday, the
Stock Market Crashed when over 16
million shares of stock were sold that
day




From 1921 to 1929, the Dow Jones
rocketed from 60 to 400
In October 1929, the Dow sank from 400
to 145
$140 billion of depositor money
disappeared because banks had invested
depositors money in stocks
The Dow Jones finally surpassed its 1929
high, a full 26 years later in 1955.

By October 27, 1929 RCA was trading
at $58.50 per share when the first
wave of selling on “Black Monday“,
October 28, 1929 brought the shares
down ($18.375) to close at $40.25 per
share on the day. By August 11, 1932,
RCA was trading at $8.875 and hit a
1932 low of $2.50 per share


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Stock prices on Sept. 3, 1929, Oct. 29,
1929 and Nov. 15, 1929
General Electric- $396.25, $210.00,
$201.00
Hershey Chocolate-$128.00, $108.00,
$68.00
4. Banks Collapse



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Depositors rushed to withdraw money from banks
The Fed limited the money supply to discourage
lending
Banks did not have sufficient reserves
1929 – 641 banks failed
1930 – 1,350 banks failed
1931 – 1,700 banks failed
5. Tariffs

Hawley-Smoot Tariff 1930
– Extremely high tax imposed on imported goods
– Destroyed international trade by closing off markets
Congress passed the Hawley-Smoot Tariff
to protect American manufacturers from
foreign competition.
The strategy was
a mistake. Other
nations retaliated
and raised tariffs
as well.
The resulting drop
in world trade only
made the glut of
American factory
and farm products
harder to sell.
6. Businesses Close


When businesses
closed people lost
their jobs
By 1933,
unemployment
reached 25%

The stock market crash didn’t start the Great
Depression by itself. Instead, it quickened
the collapse of the U.S. economy.
Effects of Great Depression
in Rural and Urban Areas

Bread lines were run by Churches and
Private Charities
Dust Bowl
Hoovervilles
Hoover asks for
Volunteerism



Businesses should maintain
employment
Wealthy give to charity
Local governments provide jobs
Volunteerism Fails


Businesses continue to fail and lay off
workers
Local governments cannot provide
jobs
Hoover Creates the RFC


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Reconstruction Finance Corporation gives
loans to big businesses and banks
Businesses and banks were supposed to
hire new employees and give loans to more
businesses
This policy is known as Trickle-down
Economics
Was this effective?
RFC was ineffective


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Businesses do not hire workers
Bankers keep money for themselves
Unemployment remains high
Hoover’s Success



Boulder Dam
(Hoover Dam)
Created much
needed jobs in
Southwest
Provided electricity
and irrigation
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