The Great Depression

The Great Depression And the Stock Market Crash

Events leading up to the Stock Market Crash: • Industries in Trouble • Farmers need a Lift • Consumers have less money to spend • Living on Credit • A New President

Industries in Trouble: • Key Industries such as textiles, steel, and railroads barely made a profit. • Coal Mining was especially hit-hard because of new competition for new types of energy emerging.

Industries in Trouble Cont… • By the 1930's only three sources supplied more than half of the energy that used to come from coal. • Building permits declined by 25 percent.

Farmers Need a Lift: • Agriculturesuffered the worst more than any other part of the economy during the 1920's. • Crops such as wheatand corn (that were in high demand during the war) declined by 50 percent or more at the conclusion of the war.

Consumers have less money to spend: • Since incomes fell, consumers and families had less money to spend on goods and services.

Living on Credit: • No, many Americans were purchasing goods on a buy now and pay later arrangement that was called credit. • These people on credit were on payment plans (that were usually monthly) that also included interest charges.

Uneven Distribution of Income: • During the 1920's, nearly half of the nations families earned less than $1,200per year. • Families earning twice this much could not afford many of the household products that manufactures produced.

Uneven Distribution Cont… • Between 1920-1929 the income of the wealthiest 1 percent of the population rose by 75 percent, compared to the 9 percent national average.

New President: • Hoover wins the election because he was able to point to years of prosperity under the Republican Party since 1920. • Smith's opposition to Prohibition, his religion (Roman Catholicism), and his heavy Brooklyn accent helped lose him the election.

The Stock Market come crashing down: • Dreams and Riches in the Stock Market • Black Tuesday • Causes of the Great Depression

Dreams and riches of the Stock Market: • Americans rushed to buy stocks and bonds, in a “bull market”- period of rising stock prices. • One observer wrote, “It seemed as if all economic law had been suspended and a new era opened up in which success and prosperity could be had without knowledge or Industry.” • By 1929, about $4 million Americans (or 3 percent of the nation’s population) owned stock.

Dreams and riches cont… • Many investors were engaging in Speculation- they bought stocks and bonds on the chance that they might make a quick or large profit, ignoring the risk.. • Buying on Margin- paying a small percentage of a stock’s price as a down payment and borrowing the rest.

Black Tuesday: • October 29, 1929, known as Black Tuesday, the bottom fell out of the stock market. • By min-November, investors had lost $30 billion, an amount equal to American spending in World War I.

Causes of the Great Depression: • Great Depression- the period from 1929-1941, in which the economy was in severe decline and millions of people were out of work.. • Main Causes of the Great Depression: • An old and decaying industrial base • A crisis in the farm sector • The availability of easy credit • An unequal distribution of income

Financial Collapse • In 1929, 659 banks shut down. • By 1933, nearly 6,000 banks (or one-fourth of the nation’s total) had failed. • Also, 85,000 businesses went bankrupt. (Ex: Automobile companies that prospered in the 1920’s.)

Financial Collapse Cont… • Unemployment went from 3 percent (or 1.6 million workers) to 25 percent (or 13 million workers). One in every four workers did not have a job.

Quotes from people that lived during the Great Depression: • "If, with all the advantages I've had, I can't make a living, I'm just no good, I guess."- An unemployed Texas schoolteacher, 1933 • "Three or four million heads of households don't turn into tramps and cheats overnight, nor do they lose the habits and standards of a lifetime... They don't drink any more than the rest of us, they don't lie any more, they're no lazier than the rest of us.... An eighth or a tenth of the earning population does not change its character which has been generations in the molding, or, if such a change actually occurs, we can scarcely charge it up to personal sin.“ • - Federal relief administrator Harry Hopkins, 1933

The End

The Great Depression