The Great Depression

1. The Great Depression 1929-1939(ish)

2. What events do you think led to the Great Depression?

3. Economic Policies & issues

4. Laissez-Faire • Free Market or “hands off” economy • Minimal gov’t influence on the economy • Practiced by Presidents Harding, Coolidge, & Hoover

7. Major Acts • Fordney- McCumber Act: High tariff (tax) on foreign goods; encouraged Americans to buy American goods • Business is America’s Business: Help businessmen become rich • Rugged Individualism: People’s problems go away if they work harder

8. The Economic Cycle • The economy moves in a cycle (has its highs and lows) • Down turns are called recessions • One starts in summer 1929

9. 1929 • Consumer spending drops • Unsold goods pile up • Production slows • What happens when we don’t buy things and companies don’t keep producing?

10. Distribution of Wealth • Imbalance between rich and poor • 0.1% earning same total income as 42% • Poverty ensued • Estimated 60% of the population in 1929 was considered poor

13. Effects of Poverty • Low marketplace demand • Prices drop • Unemployment rises

14. How • Could low market place demand effect the rest of the economy?

15. Collapse

16. The Stock Market • Stock prices continue to rise • Investors buying on margin (making a down payment & borrowing the rest of the investment) • How can this cause a problem?

17. Buying on Margin • Investors make a down payment • Borrow rest of the investment (stocks) • Value of investments dropped, unable to pay back the loan • Causes banks to fail

18. Example • Mr. Tafoya buys 5 head of cattle from Mr. Anway for a total cost of $5000. At the time of purchase he pays $1000. The cattle are worth $5000 at the time of purchase. • Consumers stop buying beef. The value of the cattle drop from $1000 each to $500. Tafoya is only able to pay Anway $2500 on top of the original $1000. Anway lost $1500.

19. The Bottom Falls Out • Stock prices drop • Investors unable to pay back loans • Causes problems with the banking industry

21. Crash • Investors begin to sell rapidly • Oct. 24, 1929: 12.9 million shares traded • Oct. 29, 1929: 16 million+ shares traded (Black Tuesday) a. Day the market crashed

22. Effects • Investors who bought on margin wiped out • Shares are worthless • Consumer confidence plummets = WE STOP SPENDING MONEY

23. Production in the U.S. • Dropped drastically • GDP: 30% • Industrial Output: 47% • Caused a major jump in unemployment

24. Deflation • General decrease in the demand for goods and services • Causes producers to lower prices • Leads to an increase in the real value of money • Negative effect: people don’t make money!

25. Bank Failures • Early runs on banks caused them to fail • 1929: 659; 5102 by 1933 • Families lose their life savings

26. The Federal Reserve • Federal banking authority • Est. 1913 • Implements the country’s monetary policy III. Regulates financial institutions (banks) IV. Influences money and credit conditions (i.e. interest rates)

27. The Fed & The Depression • 1928-29: Raised interest rates in securities markets (gold) • Economic activity slowed • Negative impact on all countries using the international gold standard • Triggered global recessions • Did it again in 1931 in response to international economic crisis • Did not address money supply shortage in 1933

28. Crisis

29. What were they? • Several natural and manmade disasters contributed to the Great Depression • Unemployment • Government programs • Farmer Migrations • Dust Bowl

30. Unemployment • Increases during 1920s • Made worse by unequal distribution of wealth • Demand for consumer goods dropped, lowering prices

31. Companies don’t have $ to pay worker/consumer Worker/ consumers don’t have $ to buy goods Companies layoff workers to cut costs = unemployment goes up

32. Unemployment 1929: 3.2% 1930: 8.9% 1931: 16.3% 1932: 24.1% 1933: 24.9% 1934: 21.7% 1935: 20.1% 1936: 16.9% 1937: 14.3% 1938: 19 % 1939: 17.2%

33. Government Programs • Bread Lines contributed to unemployment • Capable workers stand in line to receive share • Makes it hard to look for work

34. Bread (Food) Lines • Free meals to the hungry • Run by charitable organizations • Food donated by people raising “soup gardens” • Al Capone ran multiple soup kitchens in Chicago

37. Bonus Army • June -July 1932 • 20,000 WWI veterans seeking cash payment for veterans’ bonus certificates (they’re broke) • Evicted by U.S. Army

38. President Herbert Hoover • Took office in 1929 • Failed to recognize the severity of depression • Ignorant of suffering of Americans

39. Hoovervilles • Shanty towns built primarily outside major cities • Occupied by poor and homeless • Named after President Hoover

41. Global Impact

42. Crisis • Economies using the international gold standard pulled into a major recession • Economic output slowed • Trade dropped IV. Unemployment rose V. Virtually every country affected to some degree

43. Geography of the Central U.S.

45. The Breadbasket of America • Western Pennsylvania to the Rocky Mntns. • North Texas to the Canadian border • The Great Plains

46. Continued… • Open farmland • Hills in some areas but relatively flat • Has the Ohio, Mississippi, & Missouri Rivers

47. Effects on the Ag Market

48. On the Farm • Prices of agricultural goods decrease • Farmer take out more loans, increase their debt • Have to buy new machinery to keep up with production demands • Dust Bowl causes production problems

49. Answer me this… • Would it be cheaper to buy a new tractor or to hire more workers to work on a farm? • Answer: Buy a tractor!

50. Post-WWI Production • Production stays at war-time levels • European markets slow buying • Prices drop • Wheat 1917: $2.14/bushel • Wheat 1921: $0.92/bushel