Chapter 13 The Great Depression Michigan Standards 7.1 Growth Crisis of Industrial Capitalism & Responses 7.1.2 Causes & Consequences of the Great Depression OPEN BOOKS to page 416 Thursday morning at 10am, Wall Street was Jammed. A crowd of thousands gathered outside the New York Stock Exchange, waiting for news. Traders shouted out their orders to sell, sell, sell. Few were willing to buy stocks, shares in business ownership whose price & value constantly fluctuate, so prices plunged steeply in the stampede. At noon, fives of the nation’s leading bankers met in the building across the street from the stock exchange. Trying to stabilize the plummeting market, these men pledged to put undisclosed millions into the stock market. They hoped that buying stocks, would make the stock prices rise. At the closing of the market that day, the stock prices started to rebound from the morning’s slump. This was short lived! The following Monday, the stock market opened with a bunch of sales, which wiped out the prior weeks gains. The bankers met again, this time….. They decided to do NOTHING. Tuesday – Oct. 29, 1929 Stock market continued to fall because of the flood of sales Stock Market Crashes!!!!!!! Summer 1929 Brokers lent out more than $6 billion to customers Brokers started calling in their margins "Margin" is borrowing money from your broker to buy a stock and using your investment as collateral. Investors generally use margin to increase their purchasing power so that they can own more stock without fully paying for it. But margin exposes investors to the potential for higher losses. As long as stock prices kept going up, brokers were happy to lend more to speculators. Speculators are people who gamble with short-term investors. Brokers started calling in their margins Many investors didn’t have the $$ to pay for their stocks Result: Brokers forced to sell stocks All this selling makes stock prices go down. Stock Prices Investors started noticing the price decline. Stock Prices PANIC !!!! They TOO started to Sell their Stocks 75% in a few months! in 1929, the stock bought on margin lost value, leaving investors unable to pay their brokers back. Savings deposits weren’t federally insured ….. People who put all their money & savings in banks, found their savings gone! After the stock market crash of 1929 …. savings in banks vanished because banks had lent their cash reserves to stockbrokers. The policy that the Federal Reserve followed dried up credit. Period of severely reduced economic activity Characterized by a sharp rise in unemployment as people lose their jobs and are unable to find ones Oct. 1929 Depression The most devastating economic downturn in the nation’s history. (The Great Depression) Was the most devastating economic downturn in U.S. history. Depressed Farms & Industries Farmers’ incomes fell Textile, limber, mining, & railroad industries declined Automobile & Construction Industries declined in the months prior to the crash Farmers & Workers Incomes Cut They couldn’t afford the manufactured goods that the nation’s industries had been putting out in the 1920s. ▪ Resulted in another weakness of the economy. Wealth Distribution Growing Gap in Wealth ▪ Between the Rich & Average Americans. Even though many business profits rose in the 1920s, not all workers received much of these profits. ▪ Result: Reduction of Consumer Buying Power ▪ By late 1920s: Radios, telephones, refrigerators, washing machines, & other goods were piling up in warehouses across the country. Monetary Policy Contributed to crash Federal Reserve System After crash ▪ Was supposed to regulate the amount of money in circulation ▪ Follows a restrictive policy that dried up credit. ▪ Policy left the country with a supply of money in circulation that wasn’t large enough to allow the economy to bounce back after the crash. Decline in Foreign Trade Late 1920s ▪ Americans began pouring money into the stock market. ▪ Bank funds for loans to other nations dried up. ▪ International trade slowed down because without American loans ▪ other nations had less money to spend on our nation’s goods. High Tariffs (taxes on imported products) ▪ Further blocked international trade. Economic Slowdown Scared Everyone! The following could be considered causes of the Great Depression: Overconsumption Dust of Goods Storms in the Great Plains Overproduction of Goods Initial Reaction to the Depression He told American in May 1930 that: “We have now passed the worst.” (trying to be positive) Met with business leaders ▪ Asked them not to cut wages or production of goods. Suggested that city & state governments help their local economy by funding building projects to provide new jobs. Helped aid farmers with the Agricultural Marketing Act. Despite Hoover’s efforts to help farmers & others Business Conditions Worsen in the 2 Years after the crash. ▪ Approx. 23,000 businesses failed in 1929 ▪ 1932 – 32,000 businesses failed Average Family’s Annual Income Dropped ▪ From $2,300 in 1929 to $1,600 in 1935. Unemployment Rose ▪ From 5% in 1929 to almost 25% in 1932. Men would walk the Streets advertising themselves for the hope of a Job! Many opportunities for employment were open to women because jobs that traditionally went to women didn’t greatly decline. In Major Cities Bread Lines stretched for blocks, as people waited for one little meal a day. Hoover’s government programs failed By early 1932, he had to admit failure. Reconstruction Finance Corporation (RFC) (Feb. 1932) Largest federal program of economic aid ▪ Authorized for $2 Billion in loans ▪ Banks ▪ Insurance Companies ▪ Railroads Hope it would stimulate industry & create more jobs (trickle-down). Goal was to stimulate industry & create jobs. Emergency Relief Act (July 1932) Enabled the RFC to distribute ▪ Additional $300 million in loans to state governments for unemployment relief. ▪ Only qualified it they were on the verge of bankruptcy. ▪ Only ½ of its available money was given out. To the economic crisis of the early 1930s was …. Voluntary Action By Business & Local Governments. With Wages Dropping, Unemployment Growing, & so Little Money going into relief measures, resentment grew among the people beaten down by the Depression. Great War (WWI) Veterans ▪ Came together to get aid for themselves & their families. ▪ Government Promised Them a BONUS for serving in the war. ▪ Veterans wanted bill early ▪ Congress denied them the Bonus early Veterans slowly left but not fast enough Hoover saw them as hostile ▪ Dispatched Army Chief MacArthur & aide Eisenhower to clear them out. ▪ Cavalry units, tanks, infantry with fixed bayonets, & a machine gun detachment went after the unarmed veterans. ▪ Veterans fled in terror to the Bonus Army Camps MacArthur went after the veterans & torched the camp. ▪ More than 100 people injured, and a baby died suffocated by tear gas. ▪ Press appalled (shocked) at the Brutal Attack, commented: “What a pitiful spectacle is that of the great American Government , mightiest of the world, chasing unarmed men, women, and children with Army Tanks.” Organizers of the BONUS ARMY published this to explain their purpose & to recruit marchers. Public already thought Hoover was cold & and unfeeling because he refused to pay for unemployment relief. The last nail in Hoover’s political coffin is what he did to the Bonus Army. Hoover stayed in Washington through most of the campaign. When he did make public appearances he was booed On Election Day, on his way to vote, people threw stink bombs at his car. Franklin D. Roosevelt won the presidency by a landslide. Chapter 13 The Great Depression Michigan Standards 7.1 Growth Crisis of Industrial Capitalism & Responses 7.1.2 Causes & Consequences of the Great Depression Farmers got severely low prices for crops Made it impossible for them to pay their mortgages. ▪ Houses (property) would go into foreclosure. ▪ Early years of the depression thousands of farmers lost their land. Foreclosure – a bank would take back ownership of the property without letting the farmer (owner) pay off the rest of the mortgage. An oversupply of crops will result in lower (decreased) prices! Penny Auctions Staged sales property for pennies to friends, who simply return it later. Helped some farmers stay on their land. Drought-Ridden Plains 7 years were crops were destroyed Thousands of Farmers had to abandon their land. Went through all of their savings Only took what they could carry Went were they thought they could find work Many went to California ▪ Faced More Hard Times ▪ Very Few Jobs & Lots of Competition. ▪ Driven by hope & False rumors ▪ More kept coming ▪ Great for California Farm Owners ▪ Could lower wages to near starvation levels & still find people to work. They Found Intense Competition for Agricultural Jobs. Don’t own the land that they farm Extremely vulnerable (at risk) to changes in the farm economy during the thirties. During the Depression ▪ The government started paying land owners to NOT plant crops. ▪ Resulted In: Tenant farmers losing their jobs Thrown off the land where some lived & worked for many years Tenant farmers & their families traveled to look for work Left behind many possessions of a lifetime. Faced discrimination during the Depression Even though many where in the U.S. for generations Many California farm owners welcomed them ▪ To help keep wages low during harvest season City Officials wanted to send them back to Mexico ▪ 1931 – 1934 Los Angeles officials sent 12,000 back to Mexico By 1933 1 out of every 4 people ▪ Were out of Work Jobless Rate above the National Level Buffalo – 30% Chicago – 50% Cleveland – 50% Toledo – 80% Apple Sellers Some people sold apples on the streets. They would buy a surplus of apples on credit from the Pacific Coast apple growers & hoped to sell the apples on the street for a small profit. Many factories laid off workers 1 or 2 years after the start of the decline. Layoff Pattern 1) African Americans & Minorities 2) Full-time Employees asked to share their jobs with others. 3) Scaled down Jobs Cut. One out of four Americans were unemployed. Many people moved in with relatives to reduce living expenses. Apartment Built for 2 or 3 people Would house as many as 15 people Evictions were common People Loss Jobs Homes Most Possessions The most damaging loss during the Depression was that of hope and pride. Evidence of mans adaptability & survival skills. Were Makeshift Cities People named these communities Hoovervilles. 1932 – Estimated about 2 million people were on the road, job seekers & their families looking for work & a place settle. Many had made temporary or not-sotemporary shelters in Hoovervilles. Even well-to-do people had to sometimes depend on the aid & charity of their neighbors during the depression. People that were wealthy before the depression, had a better chance of making it out of it with minimal financial damage. Very small amount of people took advantage of the rock bottom prices during the depression. The number of registered automobiles in the U.S. increased by 8 million. The loss of money & material possessions wasn’t nearly as damaging as the sense of lost hope & pride brought on by years of unemployment & underemployment. In Families The dad (traditional provider) ▪ Lost status & self-esteem during the Depression ▪ Loss of Income ▪ Many couldn’t support their families ▪ Maintain their former lifestyles. ▪ Some went out daily to seek work ▪ Some did things to keep themselves busy ▪ One child remember that her dad spent 2 years painting their house. ▪ Trying not to lose their self respect. Women traditionally homemakers. experienced less disturbance of their daily life during the years of the depression. Their families depended on them even more ▪ Thriftiness kept their families from starving. ▪ Canned Food ▪ Dried Food ▪ Sewed Clothes Started Home Businesses Doing Laundry Selling Baked Goods Renting Out Rooms to Boarders Many Ran the Household & Held a Job Outside the Home. Faced Increasing Discrimination In Professional Fields Jobs that traditionally went to women didn’t decline as bad as jobs that traditionally went to men. Women’s Traditional Jobs Clerical Work Retail Sales Men’s Traditional Jobs Professional Jobs Manufacturing Jobs While the depression torn some families apart …. the hard times of the depression actually brought some families closer together. Many people stayed home & avoided socializing Ashamed ▪ of worn clothes ▪ Decline of Fortune Young People Waited to Get Married Married Couples Avoided Having Children. Domestic Upheaval (or sudden change) Unemployed Fathers Mothers working long hours for low wages. Many of the Hoboes who hitchhiked across the country on freight trains were unemployed men who at 1st set out to find work in other parts of the country. Many Hoboes Unsuccessful & Ashamed to Return Home Deserted Their Families Lived Together in Hobo Camps Unemployed men called hoboes hitchhiked across the country on freight trains & set up camps beside railroad tracks. Chapter 13 The Great Depression Michigan Standards 7.1 Growth Crisis of Industrial Capitalism & Responses 7.1.2 Causes & Consequences of the Great Depression June 30, 1936 – Smashes Sales Records Instant Success During the Depression. By: Margaret Mitchell Never written a full book before About Scarlett O’Hare & Rhett Butler in plantation Georgia, during and after the Civil War. Reading books became an emotional escape People felt like they could physically escape their problems with automobiles. Americans romance with cars continued in 1930s. A new car was a status symbol – a sign of wealth or great prestige. People saw their cars as a status symbol. Even if they couldn’t afford fuel to drive their cars, they still saw their cars as one of their most prized possessions. Some kept their cars & kept driving them, whether if they could afford it or not. Thousands of restless people went out on the highways during the depression. Mid-1930s Bunch of two lane roads in U.S. ▪ People took off on these roads for new unknown places. ▪ Some were Job Hunting Seeking Adventure Road Trip – Family Vacation ▪ Tourism was the 3rd largest industry ▪ Ex: in 1935 – 35 Million Vacationers on the Road Automobile Industry Kept Growing 1933 24 million 1937 32 million Car was Ultimate Machine for Escape! Number of Registered Cars in the U.S. increased by 8 Million. Began in the 1920s As more houses were wired with electricity, the market for new household appliances grew. Refrigerator Most sought after appliance. Washing Machine & Electric Iron Made household chores easier For a child in the 1930s 10 Cents Would Buy ▪ Round Trip Fare on a Street Car ▪ 2 Apples from a Corner Vendor ▪ Malt at a Drugstore Fountain ▪ Afternoon at the Movies Many adults & children went without afternoon snacks & saved their $ for the movies. “Talkies” or Movies with Sound Became More Common. Gave People a Well Needed Escape Color Film Technology Added Appeal to the Movies More & More Movie Makers switched (from Black & White) 1939 – Gone with the Wind ▪ Converted many who preferred black & white to color. 1930s - Radio was a Huge Piece of Furniture Gathering Place for Hours of Entertainment 1929 – More than 10 million families owned a radio. Radio Served Many Purposes Link to the Outside World Housewife’s Companion as she did her Daily Chores. Gave Unemployed the Comfort of Company Occupied Young Children After School Entertained Families during Long Winter Evenings. The Grapes of Wrath By John Steinbeck Was one of the Most Famous Novels in the 1930s. Focused on an Okie family driven from their land. Documentary Photography Showed the Depression stripped hopes & dreams. Photos Included: ▪ Poor Migrant Workers from Alabama ▪ Evicted Wheat Farmers from the Dust Bowl ▪ Hungry Children in Hoovervilles Photos quickly showed how the Depression affected people. Depression Shattered the Lives of Many Americans! Photos showed displaced farm families and migrant workers during the Great Depression.