Economic Troubles on the Horizon
• As the 1920’s went on, serious
problems threatened economic
prosperity
• Some Americans became very
wealthy and some could hardly
earn a wage
• Farmers grew more crops than
they could sell
• Consumers and farmers were
going into debt… quickly!
Industries in Trouble
• During the 1920’s key basic
industries, railroads, textiles, and
steel, had barely made a profit
– Railroads lost business due to
other new forms of transportation
– Mining and lumbering, had
expanded during WWI, and were
no longer in high demand
• Coal fell victim new forms of
energy such as hydroelectric
power, fuel oil, and natural gas
Farms Need a Lift
•
Farmers suffered the most during the 1920’s
– During WWI, demand for crops went up so
farmers borrowed money so they could plant
more crops, buy more land and farm
equipment
– WWI ended, and the demand went down 40%
and farmers were left with an abundance of
crops they couldn’t sell and a ton of debt they
couldn’t pay
– Annual farm income went down from $10
billion to $4 billion in one year!
Farms Need a Lift
Many farmers lost their farms when the bank
came and took them because they couldn’t pay
their loans
• In turn, many rural banks ended up failing and
were on the verge of closing
– Often auctioned off farming equipment and
anything to try to recoup their loss of money
• Congress tried to help when they passed the
McNary-Haugen bill which called for federal pricesupport for certain products
– The government would buy surplus crops at a
guaranteed price and sell them on world
Market… Coolidge vetoed it twice!
•
Consumers Have Less Money To Spend
•
As farmers’ incomes fell they bought fewer goods
and services and consumers in general were not
buying as much because:
– Rising prices
– Stagnate Wages
– Unbalanced distribution of income
• More than 70% of the nations family earned
less than $2,500 per year
– Overbuying on credit in the preceding years
• Many Americans appeared to be prosperous
but they were actually living beyond their
means and using credit for everything!
Dreams of Riches in The Stock Market
•
The stock market was the name of the game in
the 1920’s, those who could afford to invest in the
stock market did –> See HW for more info!
– The Dow Jones Industrial Average was/is what
determined the Stock Market’s health
• The Dow is a measure based on the stock
prices of 30 representative large firms trading
on the New York Stock Exchange
• If the Dow is doing well, the stock market is
doing well!
• In the 20’s the Dow hit 381 points which was
300 points more than a year earlier
Dreams of Riches in The Stock Market
People took advantage of the “bull market” (a
period of rising stock prices) and rushed to buy
stocks and bonds but…
– People were engaging in speculation – they
bought stocks and bonds on the chance of a
quick profit, while ignoring risks
– Many were buying on margin- paying a small
percentage of a stock’s price as a down payment
and borrowing the rest
• With easy money available to investors it boosted
the market upwards
– But this didn’t reflect a companies true worth!
•
The Stock Market Crashes!
•
In early September of 1929, stock prices peaked
and then fell and people stared to get iffy about
their investments
– On October 24, the market took a plunge and
investors unloaded their shares
• On October 29th- now known as Black Tuesdaythe bottom fell out of the market (suddenly lost
value)
– People tried to sell their shares before they lost
even more value roughly 16.4 million shares were
dumped that day!
– People were stuck with HUGE debt!
The Stock Market Crashes!
In order to pay off their debts from
buying on margin people used what
little savings they had and those that
played the market with their savings,
lost it all!
• By mid-November, investors had lost
about $30 billion! Roughly what the
U.S. had spent on W.W.I
• The stock market crash signaled the
beginning of the Great Depression
– The period from 1929 to 1940 in
which the economy plummeted and
unemployment skyrocketed.
•
Bank and Business Failures!
•
After the crash, many people
panicked and withdrew their money
from banks…
– Some couldn’t get it because the
bank had invested it in the stock
market
– 1929, 600 banks closed
– 1933, 11,000 of the 25,000
banks in the U.S had failed
– Government didn’t protect or
insure bank accounts, so millions
of people lost their savings!
Bank and Business Failures
•
The depression was felt nation wide
– Between 1929 and 1932, the Gross National
Product (GNP) – the nation’s total output of
goods and services- was cut nearly in half.
From $104 Billion to $59 billion
– Millions of workers lost their jobs, companies
didn’t have money to pay people, no one had
money to buy goods
• 1.6 million in 1929 to 13 million in 1933!
• One out of four workers was out of a job
• If you did keep your job you got a pay cut
and reduced hours
Worldwide Shock Waves
Much of Europe was suffering during the 1920’s
due to WWI, but the Great Depression made things
worse in Europe
– Now America was very limited to what it could
import from Europe (hurt Europe’s economy)
– America couldn’t continue giving Germany
money for the Dawes Plan
• Congress passed the Hawley-Smoot Tariff Act
– Highest protective tariff in U.S. history which
was supposed to protect American businesses
– Actually hurt the U.S. because now businesses
couldn’t export to Europe
•
Worldwide Shock Waves
Most common set of factors that caused the Great
Depression:
1. Tariffs and war debt policies that cut down the
foreign market for American goods
2. A crisis in the farm sector
3. the availability of easy credit
4. an unequal distribution of income
• These factors led to falling demand for consumer
goods
• The federal government contributed to the crisis
by keeping interest rates low thus allowing people
to borrow more than they should of
•
•
The Depression in the Cities
Cities across the nation, people lost their jobs,
were evicted from their homes, and ended up in the
streets
– Many were forced to live in parks or sewer pipes
and wrap themselves in newspapers (soon called
Hoover Blankets), some made shacks out of
scrap metal or wooden crates
– Shantytowns- little towns consisting of shackssprang up all over
– The poor dug through trash cans for food, or
begged
– Soup kitchens and bread lines became a
common sight
The Depression in the Cities
The Depression in Rural Areas
•
The depression was somewhat better in rural
areas
– Most farmers could grow food for their
families
– Due to falling prices for food and rising debt
some farmers lost their land and farms and
there were many foreclosures- the process by
which a mortgage holder (bank) takes back
the property if an occupant has not made
payment
– Many farmers turned to tenant farming to
scrape by!
The Dust Bowl
Effects on the American Family
The Depression strengthened family ties, but
also increased family tensions
• Some men abandoned their families, discouraged
by their inability to provide for them some
became “hoboes”
– Some would take to the streets every day to
try and find work
• Women also faced greater pressures to provide
for themselves & their families
– Canned food and sewed cloths
– Ones who kept their jobs became the targets
of resentment from men
•
Effects on the American Family
•
Children also suffered during the GD
– Serious health conditions resulting from
malnutrition… rickets
– Falling tax revenues caused schools to shorten
the school day or even close
– Some teenage boys became “Wild Boys”
• Teenage boys who hopped aboard freight
trains to travel the country in search of work
• From all kinds of families, poor farmers,
miners, wealthy parents who lost their
money
• Soon became known as “Hoover Tourists”
Social and Psychological Effects
Many people became demoralized by the hard
times that they lost the will to survive
– Suicides & admissions to mental hospitals
increased dramatically.. 30% more!
• During the GD many people showed kindness to
strangers who were suffering
– People gave food, clothing and sometimes a
place to stay
– Since there was no direct relief- cash payments
or food provided by the government- a lot of
charity services sprang up or the cities offered
small amounts of compensation
•