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The Great Depression Begins

The Great Depression Begins. Chapter 17, Section 1. The Long Bull Market. What is the Stock Market? What is a Bull Market? Prosperous times in the 1920s caused many Americans to invest heavily in the stock market. Long Bull Market.

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The Great Depression Begins

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  1. The Great Depression Begins Chapter 17, Section 1

  2. The Long Bull Market • What is the Stock Market? • What is a Bull Market? • Prosperous times in the 1920s caused many Americans to invest heavily in the stock market.

  3. Long Bull Market • As the bull market continued, many investors bought stocks on margin. • (This was considered safe as long as stock prices continued to rise) • If stock began to fall, the broker could issue a margin call demanding the investor repay the loan immediately. • In the late 20s, investors bought stock blindly, without looking at a company’s earnings & profits. • Speculation occurred when investors bet on the market climbing & sold whatever stock they had to try to make a quick profit.

  4. The Great Crash • By 1929, a lack of new investors in the stock market caused stock prices to drop & the bull market to end. • As stockbrokers advised their customers of margin calls, investors responded by putting their stocks up for sale, causing the stock market to plummet further.

  5. The Great Crash • October 29, 1929: BLACK TUESDAY –stock prices fell drastically, resulting in a $10 to $15 billion loss in value. • This did NOT cause the Great Depression, it did make the economy unable to handle other problems.

  6. Banks in a Tailspin • The stock market crash weakened the nation’s banks. • Banks lost money on their investments & speculators defaulted on loans. • The gov’t did not insure deposits, so customers lost their money if a bank closed • Bank runs: When all the customers run to the bank to withdraw their money at the same time—forcing the bank to collapse.

  7. Reasons for the Great Depression • Overproduction—efficient machinery caused more goods to be produced than Americans could afford to buy. • Uneven Distribution of Wealth—1929, the top 5% of American households earned 30% of the country’s income. More than 2/3 of the nation’s families earned less that $2500 a year. • Low Consumption—Worker’s wages didn’t increase fast enough to keep up with the production of goods. • As sales decreased, workers were laid off, a chain reaction followed that hurt the economy

  8. Reasons for the Great Depression (Cont’d) • Installment Plan—huge debts left families unable to purchase other goods. • Hawley-Smoot Tariff—raised tax on imports which intensified Depression. Other countries raised tariffs against American products in return, so fewer products could be sold overseas. • Interest Rates—Instead of raising interest rates to stop speculation, the Federal Reserve Board made the mistake of lowering rates. • This encouraged banks to make risky loans & misled business owners into thinking the economy was still expanding.

  9. Life During the Depression Chapter 17, section 2

  10. The Depression Worsens • By 1933, thousands of banks had closed & millions of American workers were unemployed. • Unemployed workers often stood in Bread Lines to receive free food or at Soup Kitchens where private charities gave a free meal to the poor.

  11. Shantytowns • Americans unable to pay their mortgage faced foreclosure. • Bailiffs escorted unwilling families out onto the streets. • Many new homeless ppl built shacks in shantytowns, or “Hoovervilles” bc they blamed Pres Hoover for their trouble. • Hobos, hitched rides on railroads searching for a better life.

  12. The Dust Bowl • As crop prices dropped in the 20s, many American farmers left their fields uncultivated. • A terrible drought in the Great Plains caused the region to become a Dust Bowl.

  13. Dust Bowl • Many Midwestern & Great Plains farmers lost their farms. • Many families moved west to California hoping to find a better life, but most still faced poverty & homelessness.

  14. Escaping the Depression • Americans escaped their hardships by going to the movies & listening to the radio. Stories tended to be about overcoming hardships & achieving success. • Walt Disney produced the first feature-length animated film, Snow White & the 7 Dwarfs. • Other films: Wizard of Oz, Gone with the Wind were about beating adversity & having a better life.

  15. Escaping the Depression • Families gathered around the radio daily to hear news or listen to comedy shows like the Lone Ranger. • Dramas called soap operas became very popular with housewives. (makers of laundry soap sponsored them)

  16. Hoover Responds Chapter 17, Section 3

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