The Great
Depression
1929-1941
1st CAUSE OF THE
GREAT DEPRESSION
•An old decaying industrial base
•Outmoded equipment made
some industries less
competitive
Industry in Trouble
The miner
says,
“Uh Oh…”
•Textiles
•Steel
•Railroads
•Mining and Lumbering
•Automobiles
•Construction
2nd CAUSE OF THE
GREAT DEPRESSION
•A crisis in the farm sector
•Farmers produced more than
they were able to sell, especially
with the demand of WWI and the
disappearance of markets that
the war had opened to them
Farmers in Trouble
•During WWI
•International demand
for food crops soared
•Prices Rose
•Farmers took out loans to buy
more land and equipment
Farmers in Trouble
•Post WWI
•Prices and demand fell
•To compensate for lower prices
farmers boosted production
•Too much infiltrated the
market
•PRICES FELL
McNary-Haugen Bill
1. The government would
buy from farmers surplus
crops at guaranteed prices
that were higher than the
market rate
McNary-Haugen Bill
2. The government would then
sell these crops on the world
market for the lower
prevailing prices
McNary-Haugen Bill
3. To make up for losses caused by
buying high and selling low, the
government would place a tax on
domestic food sales, thus passing
the cost of the farm program
along to consumers
McNary-Haugen Bill
•Congress passed 2x
•Coolidge vetoed the bill 2x
•“Farmers have never made
money. I don’t believe we can do
much about it.”
3rd CAUSE OF THE
GREAT DEPRESSION
•The availability of easy credit
•Many people went into debt
buying goods on the
installment plan
Living on Credit
•Americans buying beyond their
means
•Purchased goods on CREDIT
•An arrangement in which
consumers agreed to buy now
and pay later for purchases
•Credit easily available
•BUT Hard to pay off debts
4th CAUSE OF THE
GREAT DEPRESSION
•An unequal distribution of
income
•There was too little money in
the hands of working people
who were the vast majority of
consumers
Less Money to Spend
•Everyone’s income fell
•Americans buying less
•Rising Prices
•Stagnant Wages
UNBALANCED DISTRIBUTION
OF INCOME
UNBALANCED DISTRIBUTION
OF INCOME
•½ the nation’s families earned less
than $1500/year
•1920-1929
•Income of the wealthiest 1%
rose 75%
•Poorest 40% of the population
earned just over 1/10 of the
national income
And the Stock Market Came
Tumbling Down
Speculation:
The engagement in risky business
transactions (buying or selling
stocks) on the chance of quick or
considerable profit
And the Stock Market Came
Tumbling Down
Buying on Margin:
Paying a small percentage of a
stock’s price as a down payment
and borrowing the rest
Going, going…gone…
October 24, 1929
Stock market took a bad fall
Panicked investors unloaded their
shares
October 29, 1929
People and corporations frantically
tried to sell their stocks before
prices plunged even lower
Those who had purchased stocks on
credit acquired huge debts when
stock prices plunged
BLACK TUESDAY
October 29, 1929
Many who had invested entire
savings in the market lost
everything
16 million shares dumped
This is a scene of the Toronto Stock Exchange the day
of the crash. Immediately after this picture was taken,
the income of almost every single Canadian family was
cut by more than half. The disappearance of national
resources meant a total economy collapse. The
fisherman stopped going out to sea, workers connected
with the fish market were laid off or had fewer
working hours for less money.
Dow Jones Industrial Average
•Barometer of the Stock Market’s
health
•Measure based on stock prices of
30 representative large trading
firms trading on the NYSE
Alcoa 3M Altria (Philip Morris)
American Express Boeing Caterpillar
Citi Group Coca Cola E.I. DuPont de
Nemours Exxon Mobil General Electric
General Motors Hewlett-Packard Home
Depot Honeywell Intel International
Business Machines JP Morgan Chase
Johnson & Johnson McDonalds Merck
Microsoft Proctor and Gamble SBC
Communications United Technologies
Wal-Mart Stores Walt Disney
Financial Collapse
•Many Americans panicked (wouldn’t
you?!!) and tried to withdraw all of
their money from banks
•Banks forced to close because they
could not cover their customers’
withdrawals
•Banks lost money in the crash, too
Financial Collapse
•Economy went into a tailspin
•Unemployment rose dramatically
•1929
•3% of workforce unemployed
•1933
•25% of workforce
unemployed
Some Folks Did Ok…
•Joe Kennedy made all of his
money during the weeks just
before the Crash
•Some held onto their jobs
•Endured pay cuts
•Endured fewer work hours
$$$$$$$$$$$$$$$$$$$$$$$$
Shockwaves Throughout
the World
•Europe still recovering from
WWI
•USA limited Europeans from
exporting their goods
•THEREFORE, IT BECAME
MORE DIFFICULT TO SELL
US GOODS ABROAD
Hawley-Smoot Tariff
The most ridiculous sounding name for a tariff ever
•Highest protective tariff in
history
•Designed to help US farmers and
manufacturers by protecting their
products from foreign competition
Hawley-Smoot Tariff
BACKFIRED:
•Reduced number of European goods
into USA
•Prevented other countries from
earning US currency to purchase
American exports
•Countries reacted by raising their
own tariffs
•Reduced overall economic activity
Gold
Standard
•Britain and other European
countries went off the Gold standard
•Paper money could no longer be
exchanged for gold
•Gold dropped in value
•Europeans began to purchase US
goods and repaying loans in cheaper
currency
Gold Standard
Today, money is based on
“full faith and credit”
We accept dollars because:
1.They are legal tender
2.They are backed by the world’s
confidence in the US government
Unemployment
Towns
Poverty and
Families
Dust Bowl
Migrants
Shantytowns
How the Other Half Lived…
Virginia Mansion
The Manor House (Long Island)
Springwood Mansion (FDR’s Home)
The Chimneys (Long Island)
Vanderbilt Mansion