Read the article and take notes on the following:

Causes of the stock market crash
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Public reaction
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Broker’s reactions

Government’s response
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Optimism about rebuilding of stock market and aiding investors
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Speculated short-term and long-term economic effects

Speculated political and social effects

October 11—How is our current economic situation similar and different to what occurred during the Great Depression?

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October 28—DOW dropped 13%

October 29 (Black Tuesday)—it plunged
12% more.
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Over the next 3 years, the US stock market declined 89%.

The index didn’t regain its 1929 peak until
1954.

 http://www.google.com/finance?client=ob
&q=INDEXDJX:DJI

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During Great Depression deflation was the major issue.

2010 estimated inflation = 1.6%

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1929—More than half of US families lived on the edge of or below the minimum subsistence level
Poverty rate in 2009 =14.3% which is 43.6 million Americans
2008 = 13.2 percent, up from 12.5 percent in 2007.
There were 39.8 million people in poverty in
2008, up from 37.3 million in 2007.


As of 2008, Household debt increased from about 50% of the GDP in 1980 to a peak of
100% in 2006. Households owe as much as the entire US economy can produce in a year.

Household income dropped 9.8% from
December 2007 to June 2011. Income dropped more after the recession officially ended in June 2009.

Income dropped 3.2% Dec 2007-June 2009

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One person--$10,590
Under 65 years--
$10,787
65 years and over--
$9,944
Two people--$13,540
Householder under 65 years--$13,954
Householder 65 years and over--$12,550
Three people--$16,530
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Four people--$21,203
Five people--$25,080
Six people--$28,323
Seven people--$32,233
Eight people--$35,816
Nine people or more--
$42,739

Income inequality— http://motherjones.com/politics/2011/0
2/income-inequality-in-america-chartgraph

A Harvard business prof and a behavioral economist recently asked more than 5,000 Americans how they thought wealth is distributed in the United States. Most thought that it’s more balanced than it actually is. Asked to choose their ideal distribution of wealth, 92% picked one that was even more equitable.


1929—Demand for US goods declines

2008—Our number one export is our debt.
We sell $700 billion of our debt a year to foreigners.

 http://www.usdebtclock.org/

US Debt = 62.3% of GDP as of 2010


As of December 2008, U.S. exports of goods and services grew by 12.0% in
2008 to $1.84 trillion, while imports increased 7.4% to $2.52 trillion.

Exports comprised 13.1% of U.S. GDP in
2008. To put in historical terms, exports were 9.5% of U.S. GDP five years earlier
(2003), and 5.3% 40 years ago (1968).


1929-US allies could not pay their debt because Germany and Austria could not pay the reparations and the US was not willing to forgive or reduce the debt.

About 4 million homes have been repossessed since 2006.
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4.2 million loans are currently delinquent. It would take 4 years for the market to absorb those houses.

2008
2010


1929—Protective Tariffs

Today—Free trade


Great Depression--European banks began to fail in 1931. Germany had high inflation.

2008—Stocks plunge in Europe and Asia.
Tokyo market falls 9.4% on October 8 which is its worse decline since the 1987 crash.

2009—Much like the US, international stock markets have stabilized.


European Union debt, especially PIIGS
(Portugal, Ireland, Italy, Greece and
Spain)
 http://www.economist.com/node/1583802
9
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Japanese earthquake and tsunami

Bank Failures during Great
Depression

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By 2007 the financial sector’s debt was equivalent to 116% of the GDP, compared with a mere 21% in 1980.
To date, US banks have admitted to $334 billion in losses and write-downs. They were able to raise $235 billion in new capital but that is still a $99 billion net loss.
140 banks failed as in 2009
156 banks failed in 2010
74 banks failed in 2011 as of September
2011.

Interest Rates during the Great
Depression

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Since the credit crunch began in August 2007,
Bernanke has repeatedly cut the federal funds rate from 5.25% down to an effective rate at one point last week of about 0.25%.
The Federal Reserve has pumped about $1.1 trillion into the financial system in the past 13 months.
Fed said it would leave the interest rate at 0.25% for
“an extended period.”
Policy makers also announced that they would stretch out the Fed’s program to buy up almost $1.5 trillion worth of mortgage-related securities through the end of March. That program is aimed at keeping mortgage rates low and propping up the housing market.


Gross National Product = an economic statistic that include GDP plus any income earned by residents from overseas investments minus income made by overseas residents

1929—plummeted from over $104 billion to $76.4 billion in 1932

Today- $13.13 trillion


25% of US workforce was unemployed by
1932 and it never dropped below 15% the rest of the decade.

US unemployment rate as of August 2008 is 6.1%.

US unemployment rate as of August 2009 is 9.7%.

US unemployment rate as of August 2011 is 9.1%

US unemployment during Great
Depression


The average length of time a person who lost a job was unemployed increased to
24.1 weeks in June 2009, from 16.6 weeks in December 2007, according to the federal Bureau of Labor Statistics.

Since the end of the recession, that figure has continued to increase, reaching 40.5 weeks in September, the longest in more than 60 years.

 http://www.google.com/publicdata/explor e?ds=z1ebjpgk2654c1_&met_y=unemploy ment_rate&tdim=true&fdim_y=seasonalit y:S&dl=en&hl=en&q=us+unemployment+ rate#ctype=l&strail=false&nselm=h&met_ y=unemployment_rate&fdim_y=seasonalit y:S&scale_y=lin&ind_y=false&rdim=state
&ifdim=state&tdim=true&hl=en&dl=en

How did the Great Depression affect African Americans?



They experience more unemployment, homelessness, malnutrition, and disease than they had in the past and more than whites experience.
More than half still lived in the South, but approx. 400,000 moved to the North.
2 million, half the African American population of the US—were on some form of relief by 1932.


Approx. half a million Latinos left the US for Mexico in the first few years of the
Great Depression.


By the end of the Depression, 25% more women were working than had been at the beginning.

Black women suffered massive unemployment because of the decline in domestic service jobs.

As many as half of all African American women lost their jobs in the 1930s.


Herbert Hoover

Agricultural Marketing Act

Hawley-Smoot Tariff

International financial panic of the spring of 1931

Reconstruction Finance Corporation (RFC)

“Bonus Army”


Election of 1932

Emergency Banking Relief Act of 1933

Glass-Steagall Banking Reform Act

UN 761-774

Emergency Banking Act


Economy Act
Glass-Steagall Act




Agricultural Adjustment
Act
National Industry
Recovery Act
Tennessee Valley
Authority
Federal Emergency Relief
Administration (FERA)
UN p. 775-789
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Second New Deal
National Labor Relations
Act
Social Security Act
Works Progress
Administration (WPA)
“Court-packing plan”
Recession of 1937
Limits and legacies of
New Deal
Fair Labor Standards Act